Obama economic team to sweep Wall Street clean

“It turned out we were either naive or stupid to think that when candidate Obama spoke about "change you can believe in," he was including Wall Street.”

WHEN US voters elected Barack Obama president in November 2008, many of us were convinced he would make a top priority of reforming Wall Street, which had just almost succeeded in bringing down our way of life through greed and lack of accountability. Despite the fact that Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) were among Obama's top 10 financial backers in 2008, we were hopeful we would see a change in the system whereby bankers, traders and executives were rewarded every day to take huge, asynchronous risks with other people's money.

William D. Cohan is the author of the recently released "Money and Power: How Goldman Sachs Came to Rule the World" and the New York Times bestsellers "House of Cards" and "The Last Tycoons."

We also believed that Obama wouldn't succumb to the backroom maneuverings of the plutocrats and behind-the-scenes money men -- such as former Treasury Secretary Robert Rubin and former Deputy Secretary Roger Altman -- who were busy advocating a quick return to the status quo and looking to move their friends into positions of great importance in Obama's Cabinet.

It turned out we were either naive or stupid to think that when candidate Obama spoke about "change you can believe in," he was including Wall Street.

In ways we may never fully understand, Rubin quickly cast his spell on Obama. Before long, Rubin proteges were appointed to the three most important economic positions in the new administration: Timothy Geithner as Treasury secretary, Lawrence Summers as national economic adviser and Peter Orszag as director of the Office of Management and Budget. For good measure, the administration named Mary Schapiro, the head of the Financial Industry Regulatory Authority, Wall Street's dysfunctional self-regulatory organization, as chairman of the Securities and Exchange Commission.

Summers has gone back to Harvard University, and Orszag is now at Citigroup (and writes a column for Bloomberg View). Geithner and Schapiro will be leaving Washington shortly. Yet other Rubin acolytes -- Gene Sperling, now the national economic adviser; Jack Lew, Obama's chief of staff; and Michael Froman, the president's top international economics adviser - - are still very much in residence at the White House.

What did these men and women collectively achieve during Obama's first term? A remarkably Wall Street-friendly set of policies. To recap, the big banks continued to be bailed out; the weak Dodd-Frank financial reform act continues to get watered down as its specific rules are hammered out; not one Wall Street trader, banker or executive has been held criminally liable for actions leading up to the financial crisis; and the Standard & Poor's 500 (SPX) has doubled since its nadir in March 2009. The Federal Reserve also did its part: pumping trillions of dollars into the capital markets to keep interest rates at rock- bottom levels (a gift to Wall Street and a tax on savers).

A pretty amazing list of favors, if you think about it. Yet Wall Street clearly thinks it is owed even more. The antipathy between the financial sector and Obama has never been greater. Eight of Republican challenger Mitt Romney's 10 top donors in the election were Wall Street firms. (Meanwhile, the markets responded to Obama's re-election with a 400-plus point drop.)

So, President Obama, the time has come for you to do in your second term what many people hoped you would do in the first: Institute meaningful reform on Wall Street. An essential first step is to sweep out the remaining vestiges of the Rubin- Altman nexus. Bring in a new group of people who not only understand how Wall Street really works but also have dedicated much of their lives to changing it.

Who might some of those people be? For Treasury secretary, the best choice is Erskine Bowles, who has distinguished himself as co-chairman of the National Commission on Fiscal Responsibility and Reform. Although it is true that Bowles was chief of staff to President Bill Clinton, and thus rubbed elbows with Rubin and Altman, he isn't in that Rubin orbit. He understands Wall Street -- he founded a small eponymous investment bank and a private-equity firm, Carousel Capital, and was a partner at private-equity giant Forstmann Little & Co. -- and did a fine job serving as president of the sprawling University of North Carolina system.