Last week, I sat down with Pulitzer Prize-winning author Ron Suskind, whose latest book, Confidence Men, describes President Obama's first two years in office, particularly during the financial crisis.
What shocked me most about the book was the extent to which Obama's economic aides ignored or thwarted his ideas. I asked Suskind to expand a little on the dynamic between the president and his economic advisors. Here's what he had to say (transcript follows):
Ron Suskind: It was usually Larry [Summers] and Tim [Geithner] in concert, not always, but often, with what they called "Hippocratic risk." First, do no harm. And, of course, [Paul] Volcker says, "First do no harm means first you do nothing! And then, second, you do nothing! People said, "First, do no harm" a thousand ways in a thousand voices when I'm choking off money supply in 1979.
The fact is, if you're going to do the heavy lifting to change things, then stakeholders who are profiting from what is a rutted and broken landscape are going to feel some pain. They will feel harm. You can make a decision as president that you want to soften the blow for them or not -- that's your call. But "First do no harm" is going to get you nowhere. That's largely what Obama embraces during that period and that's why I think opportunities are lost.
Morgan Housel: But then he brings those advisors in. And this is what really surprises me about the book -- how much his advisors started thwarting his ideas after he got elected. Obama asked his advisors for a plan to take over Citigroup (NYSE: C ) in early 2009, and they essentially ignored him. Obama had ideas for a transaction tax, and they said no. Was this insubordination or were they trying to protect Obama from himself?
Ron Suskind: You try to draw that line. It's a tough one. You know, presidents hire advisors that are smarter than them, especially in their areas of expertise; that's what presidents do. But the fact is they are there to serve the will of the president.
Now, the whole notion of "slow walking," which Tim Geithner did do on Citibank. The president gets there, and again, can you imagine being president? No, it's impossible. Obama has an enormous predictive aptitude, he's very good at playing the game in his head before the players take the field, and often he gets the score pretty close, which is both a gift and crutch because he backs away from a more dynamic approach in terms of using his power. And 2 million people are weeping on the National Mall in eight degrees in the inauguration, and he's like "I can't tamp down their expectations. It just won't work. I've got to rise to this moment."
And so he kind of self-studies, because Summers and Geithner are like "No, no. Just give the banks whatever they need, whatever they want. Open the purse." And he's reading Paul Krugman, he's reading papers from arcane scholars, and he challenges them back. He says, "Look, I want to be like Sweden, not Japan." Sweden tried bailing out its banks, Japan's done it for 20 years, and it's created enormous stagnation in that country. Sweden said after the second time, "We're not going to do this. We're going to bust them up and we're going to kill off wild speculation as their business model. We need the stiff spine of a prudent financial system for the allocation of capital. Everyone else can take risk, but we need at least this one safe haven, and the banks will be that." Sweden does that, and things work. Unemployment goes from 9% back down to 3%, eventually the banks open up and they have essentially a deal just like Roosevelt cut with the banks.
Obama wants to do it and Geithner says, "It ain't gonna happen." He slow-walks him. Obama wanted to do a lot of things, but I think the difference is, Obama was learning, and he felt the deliberative process was the best way he could learn from inside the White House. "Let's argue it out. Let's talk it through." That's what he did, like a debate society. Now a lot of this was really the Larry Summers Debate Society, and Larry is very good at running one of those.
So the president is on step four or five of some debate, he thinks it's fresh terrain. Larry has done this debate 20 times; he knows what step 20 looks like. But no one was challenging Larry on that, going "Larry just tell him where he ends up if he takes step five. Just let him know." Larry's like, "No, no, let's keep talking it through." So the part of the relitigation that the president actually rightly self-criticizes himself about, was that this debate society was not as productive as it should have been. But the president felt, "I'll argue it out. I'm as smart as Larry and Tim. I'll work it through. Let's see who's got the right answer."
And at the end of the day the president ended up not acting with a kind of immediacy of that moment historically, to do things that would change that landscape he was so carefully mapping . You know, when he acts, that map changes. He, I don't think, really understood how to do that, or even whether he could do it. He had lots of smart Washington men who said, "Oh, this is impossible, you'll never get that. That's untenable." And Obama said, "Says who? I'm Barack Obama. Let me try." He didn't do it. Now, I feel he has evolved, because I get more of a sense that he will embrace a more active tenor of leadership. Who knows, but that's at least what I feel now.