Part morality play and part cautionary tale, Pulitzer Prize-winning writer Ron Suskind's Confidence Men twines the first two years of the "preternaturally confident" Barack Obama's administration with the stunning meltdown of the American financial system.
 
Greed, inexperience, hubris and a misreading of the nature of confidence conspired to create uncertainty and distrust at the highest levels of government during the crisis.

Shockingly, even now, is Suskind's revelation that major players at Wall Street investment houses smelled disaster as early as 2005, when the first signs of the subprime mortgage market 's vulnerability surfaced.
 
"Wall Street's confidence is buying back your shares; that does not add a job. Wall Street's confidence is doing a merger; that destroys jobs," says Larry Fink, an inventor of mortgage-backed securities and head of asset management firm BlackRock.

In its waning months, the Bush Administration scrambled to keep the economy afloat as the subprime mortgage market unraveled. Most of the Bush financial team had deep ties to Wall Street, Treasury Secretary Hank Paulson, who was a former Goldman Sachs CEO. At an April 2008 meeting with the heads of the biggest investment houses, most of them friends, Paulson asked the titans "how they had ended up at this difficult juncture:

"Greed, leverage, and lax investor standards," Morgan Stanley chairman of the board John Mack said. "We took conditions for granted and we as an industry lost discipline."

When Obama took office in January 2009, he  assembled a  "smartest people in the room" economic team to continue the salvage effort, among them former Treasury secretary Larry Summers, current Treasury secretary Timothy Geithner, former Federal Reserve chairman Paul Volcker, and  financial players who served informally as Obama's direct line to Wall Street.
 
With all the brain power, expertise and good intentions, the new team struggled to get forceful legislation passed that would prevent future collapses. As Suskind writes, based on many interviews with insiders including Obama himself,  ideas and proposals put forward at daily economic crisis meetings were "relitigated" to the point of inaction. Internal strife among decision makers stalled movement on overhauling the financial system and putting back in place strong reforms.

With the gutting of the Glass-Steagall Act of 1932, in 1999 (with then President Clinton's economic team, including Summers, supporting its denuding), bank holding companies could now own other financial companies. "In fewer than six years, "complex" financial dealings full of conflicts of interest started the spiral toward collapse.

Obama presented a controlled, professorial persona to the nation at the height of the crisis, but at the White House, Suskind says, there was indecision and fear. On Capitol Hill, there were challenges to the Volcker Rule, which  mandates the separation of investment banking, private equity and proprietary trading of hedge funds from their consumer-lending arms. The rule restricts American banks from making certain kinds of speculative investments; Volcker was adamant that such speculation was a major cause of the financial crisis.
 
Suskind's reporting on what happened next is stunning: While the country endured a nail-biting period of doubt and even terror over the economy's spiral,  Democratic senators seemed not to have the best interests of the nation and their newly elected president in mind. The Dodd-Frank Wall Street Reform and Consumer Protection Act was denuded by Sen. Christopher Dodd, himself. Without the young and inexperienced president's knowledge, Dodd "had discreetly gutted the Volcker Rule.

"Many were critical of the lame-duck senator (Dodd) for not being more aggressive in his reforms, alleging that his interests were inexorably linked with the lobby he so closely served. But Dodd remained steadfast, arguing that he simply wanted to produce the strongest possible bill that could feasibly withstand a vote.

"The Volcker Rule, with teeth, was dead," Suskind writes.

Obama, already bloodied from more than a year of contentious attempts at repair and reform, and the Democrats took a "shellacking" in the 2010 midterm elections, losing the House of Representatives to the Republicans. With unemployment hovering around 10 percent, the lack of job creation hurt the president. "People liked the president, but only 32 percent felt real confidence in him as a leader," Suskind writes.

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