Noam Scheiber - The Escape Artists: How Obama’s Team Fumbled the Recovery

THREE YEARS INTO THE OBAMA PRESIDENCY, THE UNEMPLOYMENT RATE WAS PAINFULLY HIGH, THE GAP BETWEEN RICH AND POOR HAD WIDENED, AND THE STIMULUS HAD NOT DONE ENOUGH TO BRING JOBS BACK.

WHAT WENT WRONG?

A PRESIDENT WITH OTHER PRIORITIES... Barack Obama hadnt run for president just so he could clean up someone elses mess, however urgent the task. Hed run for president to usher in once-in-a-generation achievements like health care reformto change the trajectory of America.

Timothy Geithner remarked to President-elect Obama that your signature accomplishment is going to be preventing a Great Depression. Obamas response was slightly jarring. Thats not enough for me, he said. It dawned on Geithner that he and his colleagues were a sideshow rather than the main attraction. If you dont do that, nothing else is possible, Geithner protested. Yeah, Obama repeated, but thats not enough.

AN ECONOMIC TEAM RELUCTANT TO TAKE BOLD ACTION... David Axelrod was preparing Christina Romer, Obamas chief economist, for a Sunday talk show. Many experts were voicing doubts about the size of the original package, and so Axelrod asked, Was the stimulus big enough? Without hesitating, Romer responded, Abso-f---ing-lutely not. She said it half-jokingly; Axelrod did not seem amused.

AND A BRAIN TRUST THAT BELIEVED IT KNEW BETTER... It was the worst of all worlds for the Obama administration: a country that took one look at the languishing economy and another at the recovery on Wall Street and concluded that its government had put big banks ahead of ordinary people. Generously, the S&P officials didnt point out any of this. Instead, the leader of the group confessed that the agency was mostly concerned about the prospects for bipartisan compromise.

At this, Geithner became dismissive. His message was unmistakable:

TRUST US, WEVE DONE THIS BEFORE.

FACING THE WORST ECONOMY SINCE THE 1930S, PRESIDENT BARACK OBAMA HIRED A CRACK TEAM OF ESCAPE ARTISTS: financial wizards who had pulled off numerous white-knuckle getaways during the Clinton era and who were ready to do it all over again. Three years later, with the economy still in a rut, its clear that they fell far short. This is the inside story of what went wrong.

The Escape Artists features previously undisclosed internal documents and extensive, original reporting from the highest levels of the administration. Star White House journalist Noam Scheiber reveals the mistakes and missed opportunities that kept the presidents pedigreed team from steering the economy in the right direction. He shows what responsibility the president bears for those missteps, what bold actions his brain trust refused to take despite its preternatural confidence, and how the White House was regularly outmaneuvered by Republicans in Congress.

Tracking the administrations efforts deep into the fall of 2011, The Escape Artists provides a gripping look inside the meeting rooms, in-boxes, and minds of the men who tried to manage the defining crisis of the Obama presidency: how the very qualities that made these men and women escape artists in the 1990s ultimately failed them.

NOAM SCHEIBER is a senior editor at The New Republic magazine in Washington, D.C., and a Schwartz Fellow at the New America Foundation. He holds a masters degree in economics from Oxford University, where he studied on a Rhodes Scholarship. He covered the 2008 presidential campaign and the Obama White House.

Visit him at www.noamscheiber.com.

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Copyright 2011 by Noam Scheiber

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First Simon & Schuster hardcover edition February 2012

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Library of Congress Cataloging-in-Publication Data

Scheiber, Noam.
The Escape Artists / Noam Scheiber.
p. cm.
Includes bibliographical references and index.
1. United StatesEconomic policy2009 2. United StatesPolitics and government2009 I. Title.
HC106.84.S34 2012
330.973dc23 2011045693

ISBN 978-1-4391-7240-7 (print)
ISBN 978-1-4391-7242-1 (eBook)

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S hortly after four oclock on the afternoon of Wednesday, April 13, 2011, U.S. Treasury Secretary Tim Geithner walked down the hall from his office toward a large conference room facing the buildings interior. He was surrounded by a retinue of counselors and aides. When they arrived in the roomknown around Treasury simply as the largefour people were seated at a long walnut table on the side near the door. Geithner and his entourage greeted them, then walked around to the far side and took their seats.

At first glance, Geithner gave the impression of the former Wall Street banker many Americans assumed him to be. He wore elegant suits and alpha-male ties. His spread collars suggested a Savile Row provenance. But, given a moment to focus, the eye noticed hints of something else. His shoes were a bit shabby. On his wrist he wore an old digital watch. The suit, upon closer inspection, was Brooks Brothersoff the rack. It had only seemed nattier because he was well-proportioned and boyishly trim. Geithner wasnt an ex-banker after all. He was a lifelong bureaucrat.

This status gave him a measure of independence of which he was rightly proud. While friends and former co-workers moved seamlessly from government to business and back, Geithner had resisted the easy payday time and time again. I never worked on Wall Street, he told a group of congressional Democrats in early 2009. Ive worked in public service my whole life. Where others might be cowed in the presence of bankers, knowing they might soon petition the lords of finance for a sinecure, Geithner could have fun at their expense. As an assistant secretary in the late 1990s, he had once met a delegation from Goldman Sachs to discuss an obscure business matter. Well, this is a fucking ugly issue, isnt it? he said, before anyone else had uttered a word. The Goldman men laughed nervously.