The Obama Bubble: Why Wall Street
Needs a Presidential Brand
Where the Wall Street love is coming from
By Pam Martens
Despite Barack Obama’s claim that his campaign represents a mass “movement” of “average folks,” the initial core of his support was largely comprised of rich denizens of Wall Street. Why would the super wealthy want a percieved “black populist” to become the nation’s chief executive officer? The “Obama bubble” was nurtured by Wall Street in order to have a friend in the White House when the captains of capital are made to face the legal consequences for deliberately creating current and past economic “bubbles.” Wall Street desperately needs a president who will “sweep all the corruption and losses, would-be indictments, perp walks and prosecutions under the rug and get on with an unprecedented taxpayer bailout of Wall Street.” Who better to sell this “agenda to the millions of duped mortgage holders and foreclosed homeowners in minority communities across America than our first, beloved, black president of hope and change?”
This article originally appeared in the print edition of Counterpunch.org.
“We are asked to believe that those white executives at all the biggest Wall Street firms now want a black populist president because they crave a level playing field for the American people.”
The Obama phenomenon has been likened to that of cults, celebrity groupies and Messiah worshipers. But what we’re actually witnessing is Obama mania (as in tulip mania), the third and final bubble orchestrated and financed by the wonderful Wall Street folks who brought us the first two: the Nasdaq/tech bubble and a subprime-mortgage-in-every-pot bubble.
To understand why Wall Street desperately needs this final bubble, we need to first review how the first two bubbles were orchestrated and why.
In March of 2000, the Nasdaq stock market, hyped with spurious claims for startup tech and dot.com companies, reached a peak of over 5,000. Eight years later, it’s trading in the 2,300 range and most of those companies no longer exist. From peak to trough, Nasdaq transferred over $4 trillion from the pockets of small mania-gripped investors to the wealthy and elite market manipulators.
The highest monetary authority during those bubble days, Alan Greenspan, chairman of the Federal Reserve, consistently told us that the market was efficient and stock prices were being set by the judgment of millions of “highly knowledgeable” investors.
Mr. Greenspan was the wind beneath the wings of a carefully orchestrated wealth transfer system known as “pump and dump” on Wall Street. As hundreds of court cases, internal emails, and insider testimony now confirm, this bubble was no naturally occurring phenomenon any more than the Obama bubble is.
“Nasdaq transferred over $4 trillion from the pockets of small mania-gripped investors to the wealthy and elite market manipulators.”
First, Wall Street firms issued knowingly false research reports to trumpet the growth prospects for the company and stock price; second, they lined up big institutional clients who were instructed how and when to buy at escalating prices to make the stock price skyrocket (laddering); third, the firms instructed the hundreds of thousands of stockbrokers serving the mom-and-pop market to advise their clients to sit still as the stock price flew to the moon or else the broker would have his commissions taken away (penalty bid). While the little folks’ money served as a prop under prices, the wealthy elite on Wall Street and corporate insiders were allowed to sell at the top of the market (pump-and-dump wealth transfer).
Why did people buy into this mania for brand new, untested companies when there is a basic caveat that most people in this country know, i.e., the majority of all new businesses fail? Common sense failed and mania prevailed because of massive hype pumped by big media, big public relations, and shielded from regulation by big law firms, all eager to collect their share of Wall Street’s rigged cash cow.
The current housing bubble bust is just a freshly minted version of Wall Street’s real estate limited partnership frauds of the ’80s, but on a grander scale. In the 1980s version, the firms packaged real estate into limited partnerships and peddled it as secure investments to moms and pops. The major underpinning of this wealth transfer mechanism was that regulators turned a blind eye to the fact that the investments were listed at the original face amount on the clients’ brokerage statements long after they had lost most of their value.
Today’s real estate related securities (CDOs and SIVs) that are blowing up around the globe are simply the above scheme with more billable hours for corporate law firms.
“The major underpinning of this wealth transfer mechanism was that regulators turned a blind eye.”
Wall Street created an artificial demand for housing (a bubble) by soliciting high interest rate mortgages (subprime) because they could be bundled and quickly resold for big fees to yield-hungry hedge funds and institutions. A major underpinning of this scheme was that Wall Street secured an artificial rating of AAA from rating agencies that were paid by Wall Street to provide the rating. When demand from institutions was saturated, Wall Street kept the scheme going by hiding the debt off its balance sheets and stuffed this long-term product into mom-and-pop money markets, notwithstanding that money markets are required by law to hold only short-term investments. To further perpetuate the bubble as long as possible, Wall Street prevented pricing transparency by keeping the trading off regulated exchanges and used unregulated over-the-counter contracts instead. (All of this required lots of lobbyist hours in Washington.)
But how could there be a genuine national housing price boom propelled by massive consumer demand at the same time there was the largest income and wealth disparity in the nation’s history? Rational thought is no match for manias.
That brings us to today’s bubble. We are being asked to accept at face value the notion that after more than two centuries of entrenched racism in this country, which saw only five black members of the U.S. Senate, it’s all being eradicated with some rousing stump speeches.
We are asked to believe that those white executives at all the biggest Wall Street firms, which rank in the top 20 donors to the Obama presidential campaign, after failing to achieve more than 3.5 per cent black stockbrokers over 30 years, now want a black populist president because they crave a level playing field for the American people.
The number one industry supporting the Obama presidential bid, according to the widely respected, nonpartisan Center for Responsive Politics, is “lawyers/law firms” (most on Wall Street’s payroll), giving a total of $11,246,596.
“Other leading presidential candidates are taking money from lawyers/law firms/lobbyists, but Senator Obama is the only one rallying with the populist cry that he isn’t.”
This presents three unique credibility problems for the yes-we-can, little-choo-choo-that-could campaign: (1) these are not just “lawyers/law firms”; the vast majority of these firms are also registered lobbyists at the Federal level; (2) Senator Obama has made it a core tenet of his campaign platform that the way he is gong to bring the country hope and change is not taking money from federal lobbyists; and (3) with the past seven ignoble years of lies and distortions fresh in the minds of voters, building a candidacy based on half-truths is not a sustainable strategy to secure the west wing from the right wing.
Yes, the other leading presidential candidates are taking money from lawyers/law firms/lobbyists, but Senator Obama is the only one rallying with the populist cry that he isn’t. That makes it not only a legitimate but a necessary line of inquiry.
The Obama campaign’s populist bubble is underpinned by what, on the surface, seems to be a real snoozer of a story. It all centers around business classification codes developed by the U.S. government and used by the Center for Responsive Politics to classify contributions. Here’s how the Center explained its classifications in 2003: “The codes used for business groups follow the general guidelines of the Standard Industrial Classification (SIC) codes initially designed by the Office of Management and Budget and later replaced by the North American Industry Classification System (NAICS)…”
The Akin Gump law firm is a prime example of how something as mundane as a business classification code can be gamed for political advantage. According to the Center for Responsive Politics, Akin Gump ranks third among all Federal lobbyists, raking in $205,225,000 to lobby our elected officials in Washington from 1998 through 2007. The firm is listed as a registered federal lobbyist with the House of Representatives and the Senate; the firm held lobbying retainer contracts for more than 100 corporate clients in 2007. But when its non-registered law partners, the people who own this business and profit from its lobbying operations, give to the Obama campaign, the contribution is classified as coming from a law firm, not a lobbyist.
The same holds true for Greenberg Traurig, the law firm that employed the criminally inclined lobbyist, Jack Abramoff. Greenberg Traurig ranks ninth among all lobbyists for the same period, with lobbying revenues of $96,708,249. Its partners and employee donations to the Obama campaign of $70,650 appear not under lobbyist but the classification lawyers/law firms, as do 30 other corporate law firm/lobbyists.
“The total sum raised February 16-29, 2008 by bundlers for Obama from 27 law firms that engage in lobbying: $2,650,000.”
Additionally, looking at Public Citizen’s list of bundlers for the Obama campaign (people soliciting donations from others), 27 are employed by law firms registered as federal lobbyists. The total sum raised February 16-29, 2008 by bundlers for Obama from these 27 firms: $2,650,000. (There are also dozens of high powered bundlers from Wall Street working the Armani-suit and red-suspenders cocktail circuits, like Bruce Heyman, managing director at Goldman Sachs; J. Michael Schell, vice chairman of Global Banking at Citigroup; Louis Susman, managing director, Citigroup; Robert Wolf, CEO, UBS Americas. Each raised over $200,000 for the Obama campaign.)
Senator Obama’s premise and credibility of not taking money from federal lobbyists hangs on a carefully crafted distinction: he is taking money, lots of it, from owners and employees of firms registered as federal lobbyists but not the actual individual lobbyists. But is that dealing honestly with the American people? According to the website of Akin Gump, it takes a village to deliver a capital to the corporations:
“The public law and policy practice [lobbying] at Akin Gump is integrated throughout the firm’s offices in the United States and abroad. As part of a full-service law firm, the group is able to draw upon the experience of members of other Akin Gump practices – including bankruptcy, communications, corporate, energy, environmental, labor and employment, health care, intellectual property, international, real estate, tax and trade regulation – that may have substantive, day-to-day experience with the issues that lie at the heart of a client’s situation. This is the internal component of Akin Gump’s team-based approach: matching the needs of clients with the appropriate area of experience in the firm … Akin Gump has a broad range of active representations before every major committee of Congress and executive branch department and agency.”
“Obama is taking money, lots of it, from owners and employees of firms registered as federal lobbyists but not the actual individual lobbyists.”
When queried about this, Massie Ritsch, communications director at the Center for Responsive Politics, says: “The wall between a firm’s legal practice and its lobbying shop can be low – the work of an attorney and a lobbyist trying to influence regulations and laws can be so intertwined. So, if anything, the influence of the lobbying industry in presidential campaigns is undercounted.”
Those critical thinkers over at the Black Agenda Report have zeroed in on the making of the Obama bubble:
“The 2008 Obama presidential run may be the most slickly orchestrated marketing machine in memory. That’s not a good thing. Marketing is not even distantly related to democracy or civic empowerment. Marketing is about creating emotional, even irrational bonds between your product and your target audience.”
And slick it is. According to the Obama campaign’s financial filings with the Federal Election Commission (FEC) and aggregated at the Center for Responsive Politics, the Obama campaign has spent over $52 million on media, strategy consultants, image building, marketing research and telemarketing.
The money has gone to firms like GMMB, whose website says its “goal is to change minds and change hearts, win in the court of public opinion and win votes” using “the power of branding – with principles rooted in commercial marketing”, and Elevation Ltd., which targets the Hispanic population and has “a combined experience well over 50 years in developing and implementing advertising and marketing solutions for Fortune 500 companies, political candidates, government agencies”. Their client list includes the Department of Homeland Security. There’s also the Birmingham, Alabama- based Parker Group which promises: “Valid research results are assured given our extensive experience with testing, scripting, skip logic, question rotation and quota control … In-house list management and maintenance services encompass sophisticated geo-coding, mapping and scrubbing applications.” Is it any wonder America’s brains are scrambled?
“Who better to sell this agenda to the millions of duped mortgage holders and foreclosed homeowners in minority communities across America than our first, beloved, black president of hope and change?”
The Wall Street plan for the Obama-bubble presidency is that of the cleanup crew for the housing bubble: sweep all the corruption and losses, would-be indictments, perp walks and prosecutions under the rug and get on with an unprecedented taxpayer bailout of Wall Street. (The corporate law firms have piled on to funding the plan because most were up to their eyeballs in writing prospectuses or providing legal opinions for what has turned out to be bogus AAA securities. Lawsuits naming the Wall Street firms will, no doubt, shortly begin adding the law firms that rendered the legal guidance to issue the securities.) Who better to sell this agenda to the millions of duped mortgage holders and foreclosed homeowners in minority communities across America than our first, beloved, black president of hope and change?
Why do Wall Street and the corporate law firms think they will find a President Obama to be accommodating? As the Black Agenda Report notes, “Evidently, the giant insurance companies, the airlines, oil companies, Wall Street, military contractors and others had closely examined and vetted Barack Obama and found him pleasing.”
That vetting included his remarkable “yes” vote on the Class Action Fairness Act of 2005, a five-year effort by 475 lobbyists, despite appeals from the NAACP and every other major civil rights group. Thanks to the passage of that legislation, when defrauded homeowners of the housing bubble and defrauded investors of the bundled mortgages try to fight back through the class-action vehicle, they will find a new layer of corporate-friendly hurdles.
I personally admire Senator Obama. I want to believe Senator Obama is not a party to the scheme. But corporate interests have had plenty of time to do their vetting. Democracy demands no less of we, the people. CP
Pam Martens worked on Wall Street for 21 years; she has no securities position, long or short, in any company mentioned in this article. She writes on public interest issues from New Hampshire. She can be reached at firstname.lastname@example.org.
Comments (original sample)
Why not McCain or Clinton
written by Deadbeat , March 05, 2008
There is really nothing here that indicates that Wall Street would want Obama above a McCain or a Clinton. All three will not go against Wall Street. Therefore that belies the question WHY OBAMA?
It is not that Obama can better sell the transfer of wealth to the U.S. public. Both Reagan and Bill Clinton clearly sold rollback to the American public and the people voted for these right (white) wings.
There is another reason and I think Ishmael Reed. Reed asserts the following…
This is a problem that Obama faces. Wall Street wants him, Goldman Sachs, Lehman Brothers, J.P.Morgan are his contributors, and these wealthy people are beyond countries. Some of them don’t even live here anymore. I think that the Firestones live in Turkey.These multinationals, some of them, they’ve been around, they are more sophisticated than the average American, they’ve seen diversity in the world. So, they’re saying, “We need this guy to represent our interests.” Because, this whole 1950’s Country Club, Bush type image is not going to work anymore. I mean, those types of guys can’t go anywhere, I mean they can’t even travel places anymore. Bush, I mean, he can’t go to Spain or he might get arrested. (Laughs.) So, what they need is this really pretty, dark face. When Bush traveled through Africa he was confronted with questions about Barack. It must have got to him because he started attacking Barack when he returned. An Obama election would be an enormous boost to the capitalist system, which seems on the verge of collapse. I could see enormous crowds turning out to greet him as he fronts for the system. If he went to Baghdad he’d receive a ticker tape parade and even the Taliban would turn out to get a glimpse of him. He’d be mobbed in Africa and Asia.
I agree with Reed and that would seem a more appropriate reason why Obama rather than Clinton or McCain
Ishmael Reed still writes and fights
written by Michael Hureaux , March 06, 2008
Yes. Ishmael has never played, and no one who knows his work would ever suggest that his primary reason for criticizing Obama is rooted in self-hatred. But Ishmael knows what time it is, and he doesn’t play. Nothing would benefit the empire at this point more than having a black face to front for the empire. Why do the jerks that favor?
Why do the jerks that favor?
written by Deadbeat , March 06, 2008
Because it would have a “calming” effect.
Who should we vote for?
written by Just wondering , March 06, 2008
I’m just curious as to what the faithful readers of BAR think. I see story after
story on Obama, but nothing on Hillary, McCain, or Nader.
I was a John Edwards guy, but now he’s out. The choices are rather limited. Personally, I would take Obama over Clinton, but that’s just me. McCain is nothing but Bush, except much older.
I guess we’re damned if we do and damned if we don’t.