Obama Unleashed

How a calm, reasonable president gets exercised about … financial regulation.

The weekly presidential radio address is a sleepy tradition. On Saturday, though, the president said something that may have caused people to wake up and take notice. Obama called the Senate Republican Leader Mitch McConnellcynical and deceptive” for asserting that financial regulatory reform legislation now under consideration in Congress would lead to future bailouts.

President Obama usually keeps it vague. His disagreements are with “some people” or those who want to “defend the status quo.” It’s usually clear whom he’s talking about, but Obama, like all presidents, generally adds a little soft padding to stay presidential and above it all. That aloofness irritated some of his Democratic allies during the health care fight. They were glad he finally took the fight to Republicans in the end and appeared ready to keep the pressure there. They like that he’s doing it again now with McConnell. This is an election year, after all. “If he’d done this a little earlier on health care, maybe it would have passed sooner,” said one veteran Democrat involved in the fall campaigns.

The president benefits from being specific in this case because he has a story to tell about McConnell. His charge is not merely that the GOP leader is mischaracterizing the financial reform legislation. The president is charging that McConnell is in the pocket of Wall Street bankers. “It turns out Mitch McConnell thinks differently,” Obama told Democratic donors after explaining why he supports the legislation. “I don’t know exactly what happened, but he and the chairman of the Senate [electoral] committee went up to Wall Street, had a pow-wow with them, and came away—the next thing we knew they were all opposed to financial-regulatory reform. I don’t know the nature of the conversation but I’m hoping that they will do the right thing.”

Why respond so directly? No one else could do the job. If this were the debate over health care legislation, the president might be letting Democratic leaders fight it out. But in this case the White House does not want to risk losing the fight to define the legislation. The “Wall Street bailout” charge is perhaps the most toxic one in American politics right now. It inspires conservatives, irritates independents, and depresses liberals. In a political campaign where Democrats seek to position themselves as defenders of the common people against insurance companies and Wall Street banks, the characterization could not risk getting muddied.

On a policy level, the White House argues that the president used such strong language because McConnell was suggesting taxpayers would foot the bill for future bailouts when the legislation is designed to do the opposite—it would require banks to pay to liquidate failing institutions. Their case was rather thoroughly supported by Republican Sen. Bob Corker of Tennessee. “This fund that’s been set up is anything but a bailout,” he said. “It’s been set up to provide upfront funding by the industry so that when these companies are seized, there’s money available to make payroll and to wind it down while the pieces are being sold off.”

The pressure seemed to be working. Sen. McConnell on Tuesday seemed to pull back from his previous opposition to the legislation, acknowledging that “both parties agree on this point: no bailouts.” Senior Republican leadership aides said that McConnell spoke out against reform so strongly because he felt Democrats were not negotiating in good faith. Now that negotiations have restarted, they say, his goal has been achieved.  Democrats characterize this position as a climb-down and recognition that the politics were against him.

Obama will add more fodder to this debate Thursday in a speech on Wall Street reform at Cooper Union. Will he be as tough on Wall Street as he has been on McConnell, whom he says is doing its bidding? White House aides say the speech will be to the American people, setting the stakes for the legislation they see with a clarity reminiscent of George W. Bush’s position on Iraq. You’re either with American families or with Wall Street.

If he plays true to type, Obama will take the balanced tone he has tried to apply throughout—decrying the excessive bonuses and risk-taking by banks while championing the need for vibrant financial markets. This has the added advantage of not overly offending the bankers who gave so generously to his campaign and the Democratic Party. But some of his allies say the moment calls for the same sharpness against Wall Street that he used with McConnell. That would help push the legislation and make a statement about what Democrats stand for. As the White House knows, polls show that talking about restraining Wall Street only makes this legislation more popular.

If he needs a model, Obama might refer to Woodrow Wilson, another president known for his cerebral approach. In 1910, just before running for governor of New Jersey, Wilson gave a lecture about self-sacrifice which Obama could actually lift word-for-word today:

Banking is founded on a moral basis and not a financial basis. The trouble today is that you bankers are too narrow-minded. You don’t know the country or what is going on in it and the country doesn’t trust you. You are not interested in the development of the country. … You take no interest in the small borrower and the small enterprise which affect the future of the country, but you give every attention to the big borrower and the rich enterprise. … You bankers see nothing beyond your own interests. … You should be broader minded and see what is best for the country in the long run.

Though Obama has said Wall Street bankers are trying to kill reforms that will protect the rest of the country, it’s hard to imagine him offering this kind of peppery rhetoric. He also won’t be able to match the setting. Wilson gave the speech to an audience of Wall Street bankers. J.P. Morgan was sitting right next to him.

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