Politics

05.11.13

Never Mind the Middle—Barack Obama Pays Off His Rich Backers

The president’s second-term appointments reflect his top-bottom political coalition, writes Lloyd Green.

President Obama’s pincer movement on the middle class continues.  To the rich, Obama has bequeathed billionaire Penny Pritzker as Commerce Secretary, and to the poor he bestows North Carolina Congressman Mel Watt to head the Federal Housing Finance Administration. As for the middle class, Obama sticks them with a Social Security tax hike. So let’s consider each pincer, top and bottom.

First, from the billionaire top, Ms. Pritzker, aptly described in The Atlantic as “Obama’s Mitt Romney.”  In fact, she is far richer than Romney – and has even more money stashed offshore.

Pritzker makes Treasury Secretary Jack Lew look like an amateur.  As Forbes explained, “Lew only had $56,000 invested in the offshore venture fund.  By contrast, offshore tax avoiding trusts seems to have played a substantial role in the growth of the Pritzker fortune” that give Penny a net worth of $1.85 billion.

Despite his complaints about the sins of the rich, Obama likes the Democratic donor class just fine – as he should. Pritzker, heiress of Hyatt hotel fortune – lavished cash on Obama’s 2004 Senate campaign.  Then, after Obama reneged on his pledge to publicly fund his 2008 president run, he watched Pritzker, as his finance chair, shatter all fundraising records. In exchange for the lucre she collected from her super-wealthy compatriots, Pritzker expected to be named Commerce Secretary, only to see her name pulled as her past had become an issue.

That past includes her chairmanship of the failed Hinsdale, Ill.-based Superior Bank, which required a massive government agency bailout after Superior had “engaged in unsound financial activities and predatory lending practices” –the very lending practices that Obama and Watt purportedly abhor. Understandably, Pritzker is more forgiving of the bank’s errors.  Since the circumstance was “complex,” including “changes in accounting practices, auditing failures, reversals in regulatory positions and general economic conditions.”

Four years ago those explanations rang hollow. Now, with Obama term-limited, why not?

Obama’s blind eye toward Pritzker is no surprise.  As Jared Bernstein, Joe Biden’s former economics advisor, wrote ++in the pages of the New York Times++, [http://www.nytimes.com/2013/05/04/opinion/where-have-all-the-jobs-gone.html] “the concerns of Democratic policy makers shifted from working-class issues like jobs and toward the concerns of upper-income constituents.” Coming from Biden’s own wonk, that’s some confession.

On the other end of Obama’s coalition from Pritzker is 11-term Congressman Mel Watt, a member of the House Financial Services Committee, former chair of the Congressional Black Caucus, a food stamps advocate — and a favorite of the financial industry. The agency Watt is tapped to lead, the FHFA, is charged with overseeing Fannie Mae and Freddie Mac, the failed government-sponsored enterprises that degenerated into slush funds for politicians, their relatives and ACORN.

Watt, says Obama, putting a considerably kinder spin on those facts, “fought to give more Americans in low-income neighborhoods access to affordable housing.”  Yet, the Sunlight Foundation tells a different tale.

Sunlight says that Watt “received more contributions from the banking sector than any other during the course of his more than two decades in Congress.”  But, there’s more.  After being cleared by the Office of Congressional Ethics (OCE) for purportedly diluting consumer protection legislation in exchange for campaign contributions, Watt unsuccessfully sought to slash funding for the OCE.

Even after the subprime mortgage debacle and the housing collapse, Watt acted as if all was forgiven and forgotten. He voted to approve higher limits for government-backed mortgages, ensuring the rich could collect their cut of government support for “affordable housing.” 

The president seems to instinctively turn to his new rich friends, notwithstanding their notoriety.

As a friend of the poor who delivers for the rich, Watt is a natural fit in the Obama administration. Indeed, the president seems to instinctively turn to his new rich friends, notwithstanding their notoriety. For example, Obama tasked Jim Johnson, the disgraced former Fannie Mae honcho, to oversee his 2008 vice-presidential vetting process — after Johnson had bundled over $200,000 for Obama.  That gig was short-lived once Johnson’s disastrous stint at Fannie Mae garnered attention.

In case anyone forgot, Johnson was the “anonymous architect of the public-private homeownership drive that almost destroyed the economy in 2008,” according to New York Times reporter Gretchen Morgenson and analyst Joshua Rosner in their book Reckless Endangerment. They write that Johnson was “especially adept at manipulating lawmakers, eviscerating regulators and leaving taxpayers with the bill.”  While at Fannie Mae, Johnson received a $7 million VIP loan from Countrywide, and in his last year at the agency he received approximately $21 million in compensation.

Like Obama, Watt was a beneficiary of Johnson’s largesse.  The Center for Public Integrity reports that “Fannie Mae’s and Freddie Mac’s PACs contributed $11,500 to Watt’s campaign from 2004 until their 2008 bailouts.”  Records also show Fannie and Freddie employees donating at least $4,250 to Watt between 1998 and 2004.

Apparently, the rules don’t apply to Obama’s cronies.  In 2009, Obama inveighed against Caribbean tax havens, as he branded Ugland House on Grand Cayman — the nominal home to over 12,000 businesses — “the largest building in the world or the largest tax scam.”  But Obama didn’t end there. He continued, “I think the American people know which it is:  The kind of tax scam that we need to end.” Except for the Pritzker Clan, we can presume.

Then, during his reelection campaign Obama & Co. repeatedly took aim at Romney for his foreign holdings.  Biden described Mitt as “guy with a Swiss bank account,” with “millions in the Cayman Islands, who refused to release his tax returns.”

So what does Biden have to say about Pritzker? Or for that matter about Tom Donilon -- Obama’s National Security Adviser who served as Fannie Mae’s lobbyist under Johnson? Very little, apparently.

Pritzker and Watt should fit right into this administration, one inhabited by the likes of Lew, Donilon and the ghost of Tim Geithner, Lew’s tax-amnesiac predecessor – if they can clear the Senate. So, over to Harry Reid, who blasted Romney++ for his offshore holdings, wealth and tax returns.  Harry, how do you feel about Penny P., who makes Mitt look like her mini-me?