Confidence Men Part 9

This prompted a dustup. During a debate the following week, Hillary Clinton, smarting from the slight to her husband's tenure, accused Obama of "admiring Ronald Reagan."

Obama's response was almost legalistic: "What I said was-is that Ronald Reagan was a transformative political figure because he was able to get Democrats to vote against their economic interests."

Since then, there'd been a change in tense. Obama and others began to think more seriously about how Reagan had managed his transformative magic, how it might be created again and put to a different purpose.

Obama had been meditating on Reagan's presidency and legacy for a long time. In The Audacity of Hope he writes that "Reagan spoke to America's longing for order . . . our need to believe that we are not simply subject to blind, impersonal forces but that we can shape our individual and collective destinies, so long as we rediscover the traditional virtues of hard work, patriotism, personal responsibility, optimism and faith."

Fifteen minutes into his Inaugural Address, he echoed that pa.s.sage in the central pa.s.sage of his own speech: "Our challenges may be new, the instruments with which we meet them may be new, but those values upon which our success depends, honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism-these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility-a recognition on the part of every American that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character than giving our all to a difficult task."

Reagan's difficult task when he stepped to the lectern in January 1981 was similar, if less dire. Unemployment had eclipsed 7 percent, and inflation was averaging a startling 12.5 percent. Having won electoral support from conservatives for his stances on a host of social issues, Reagan was compelled to put all these aside when he took the oath of office and to focus instead on the economy. Fortunately for him this dovetailed with another theme of his campaign: reining in the growth of government and unleas.h.i.+ng the power of the private sector. Or at least he could claim it did.

And this was just what he claimed, with considerable rhetorical skill, in his Inaugural Address, a.s.serting brazenly that the country's troubles were for good reason "parallel and proportionate to the . . . unnecessary and excessive growth of government." Following this with the bold affirmation that we were "too great a nation to limit ourselves to small dreams," Reagan cast government as the bad guy, standing in the way of the country's hopes and aspirations. "In the days ahead," he continued, "I will propose removing the roadblocks that have slowed our economy."

While Reagan's address lacked a signature line like Kennedy's famous "ask not," it spoke to a s.h.i.+fting cultural current-to the individual and entrepreneur-laying a vicious right cross on the talk of shared sacrifice that dominated the late seventies: "We have every right to dream heroic dreams."

But Reagan's most remembered line-"In the present crisis, government is not the solution to our problems"-sounds today hedged and conditional, his qualification about not wanting to abolish government but "make it work, work with us, not over us," altogether tame.

Nearly thirty years later Obama would utter almost identical words during his inaugural speech, explaining that the "question we ask today is not whether our government is too big or too small, but whether it works." This was, in fact, the centerpiece of what he put forward as a remedy to our long list of ills. The speech was mostly that list-what had gone wrong and the country's history of overcoming challenges similar and even greater in their breadth. No one would ever forget attending Obama's inauguration, but for most of them the speech itself underwhelmed. They had come to be inspired, and he had denied them.

The next day would be Obama's first full one as president, and he would spend it diving full bore into the stimulus debate. On a conference call with Nancy Pelosi's office, he pushed for the very "inspiration" he had deliberately withheld the day before.

"This stimulus needs more inspiration!" he shouted into the speakerphone.

Pelosi and her staff visibly rolled their eyes. Inspiration works ideologically and rhetorically. It can consume and invigorate the ma.s.ses, and get results when their ire or enthusiasm is then directed back at the permanent government. But day to day, in the clinch with the canny operators of Was.h.i.+ngton, inspirational gifts find no neat application.

Next to the speakerphone was that morning's Was.h.i.+ngton Post, so thick with photos and purple prose about the inauguration that it looked like a special collector's edition.

That's the way it was. The town was swept up in the power of a moment, of an African American man taking the oath of office before two million people, those who'd "seen it all" but still wept, and others who hoped to tell their grandchildren of this day.

But after covering nine presidencies, the dean of the city's press corps, Was.h.i.+ngton Post columnist David Broder, still spry at seventy-nine, managed to summon a kernel of hard perspective in the last line of his column that morning.

"What speeches can accomplish, they have delivered handsomely for Barack Obama," he wrote, in a gentle warning to the young president. "Now, it will depend on his deeds."

Photographs.

UBS-America president Robert Wolf, whose bank was leveraged at more than 50 to 1, sounded a first alert to then-candidate Obama on August 4, 2007, warning that a "market-driven disaster" was on the way. Wolf, pictured here golfing with Obama in 2010, said, "This could be a once-in-a-lifetime kind of thing."

Jewel Samad/AFP/Getty Images In September 2007, Obama delivered a speech on financial reform at NASDAQ. Still a long-shot candidate, 30 points behind Hillary Clinton, he was well ahead of his rivals in warning of the need to reform Wall Street. The speech got little coverage, but Wall Street noticed.

Timothy A. Clary/AFP/Getty Images Employees of Lehman Brothers leave their New York offices with their possessions in boxes after the 158-year-old investment bank declared bankruptcy on September 15, 2008. The bankruptcy initiated the most turbulent economic collapse since the Great Depression.

Chris Hondros/Getty Images A managing director of Lehman's real estate department, Carmine Visone-after thirty-six years at the firm-saw his "standards of value" under siege by both the real estate boom and his outsized pay. His response was to regularly rent a truck, fill it with groceries, and deliver "something of indisputable worth-food!" to the hungry and dest.i.tute on the streets of New York. The financial crisis left the city's food pantries overflowing with the homeless and Visone, his world shattered, considering dire options.

Privately Held Photograph Merrill Lynch president Greg Fleming was in a footrace with Paulson, Geithner, and Bernanke as "Lehman weekend" approached. Both Lehman and Merrill needed to be saved, but Fleming, in a bold stroke, persuaded the only credible suitor, Bank of America, to buy his investment firm. The next day, Lehman collapsed into the government's arms and chaos ensued.

Neilson Barnard/Getty Images Treasury Secretary Hank Paulson did little in the year-long run-up to Lehman's collapse-fearful of undermining "confidence" in the financial system-then went to Capitol Hill to beg lawmakers to pa.s.s the unpalatable bank bailout later known as TARP. Here, in September 2008, with Fed chairman Ben Bernanke, he warned Congress of impending disaster, as SEC chairman Christopher c.o.x and Senator Chris Dodd (D-Conn.) look on.

Chip Somodevilla/Getty Images The electric moment of the Obama family stepping onto a s.h.i.+ning stage in Grant Park etches itself into collective memory. Already, though, Obama-who said "my presidency began in September," as the financial crisis boosted him to an insurmountable lead-was a step removed, feeling the burden of the challenges he faced and trying to tamp down Election Night enthusiasm.

Timothy A. Clary/AFP/Getty Images Obama announced his key economic appointments in November 2008. The team, largely replacing his campaign's more progressive group of Volcker-led advisers, would be marred by bitter infighting and constant "relitigation." From left to right: Tim Geithner, Christina Romer, Larry Summers, Melody Barnes, and President-elect Obama.

Scott Olson/Getty Images While Chief of Staff Rahm Emanuel's "points on the board" focus never became a coherent managerial strategy, the ensuing drift and confusion often left him and Larry Summers acting in the president's stead. Obama was delighted in September 2010 when an opportunity opened up in Chicago's mayoral race, saving him the prospect of dismissing his top aide.

The White House/Getty Images Two top economic advisers, NEC chairman Larry Summers (left) and OMB director Peter Orszag (right) clashed frequently after Obama took office, but held a grudging respect for each other's intellect. Summers repeatedly told Orszag that, with Obama as president, "we are home alone," and that "Clinton would never have made these mistakes."

Pool Photograph/Getty Images A gender divide in the White House immediately struck White House communications director Anita Dunn when she arrived in April 2009. Looking back, she and others considered it a hostile workplace for women. Here Dunn consults with another adviser who spanned both the campaign and administration, Obama's trusted counselor David Axelrod.

Chip Somodevilla/Getty Images a.s.sistant Treasury Secretary Alan Krueger (right) said, "We lost the country with the AIG bonuses and never won them back." A leading labor economist, Krueger-seen here with Treasury Secretary Geithner-briefed Obama on ways to reduce unemployment and fought fiercely, though futilely, for a major federal jobs program.

Win McNamee/Getty Images Treasury Secretary Tim Geithner's jammed schedule for Monday, March 9, 2009. Through the day and evening, he talked to the FDIC's Sheila Bair four times and Citibank chief Vikram Pandit twice. On the 3:00 to 3:45 conference call with Bair, Bernanke, and others, he blocked the FDIC chair's effort to have Citibank's managers fired and the bank restructured. Little more than fifteen minutes later, at 4:05, he was again on the phone briefing Pandit.

Publicly Available Doc.u.ment While Obama focused on health care, the Senate's Democratic leaders.h.i.+p-eager to push forward financial reform-was kept at bay. In a terse mid-March letter to Emanuel, North Dakota's Byron Dorgan, representing seven senators, shows frustration over Rahm's attempt to reroute their long-delayed meeting with Obama over to Larry Summers.

Privately Obtained, Noncla.s.sified Doc.u.ment After details of AIG's post-bailout bonuses leaked to the press in mid-March 2009, protestors-these in Connecticut-demonstrated. As antiWall Street populism reached a fever pitch, the administration quietly approved some of the largest governmental supports for Wall Street and ducked uncomfortable questions.

Stan Honda/AFP/Getty Images Goldman Sachs CEO Lloyd Blankfein (left) and JPMorgan Chase CEO Jamie Dimon (center) talk to reporters after Obama met with the thirteen bankers representing the country's largest banking inst.i.tutions. After Obama said, famously, to them, "My administration is the only thing between you and the pitchforks," his tone turned conciliatory. "You guys have an acute public relations problem that's turning into a political problem. And I want to help."

Chip Somodevilla/Getty Images Launching his top priority of health care reform, Obama introduced Ted Kennedy, then dying of brain cancer, to cap an inspirational White House Health Care Summit on March 5, 2009. Little was done, though, in the coming months, as the White House lost control of the debate to bickering senators and Tea Party activists.

Chip Somodevilla/Getty Images Former Senate majority leader Tom Daschle, chosen by Obama to head Health and Human Services, was forced to withdraw when a tax scandal surfaced. He tried to advise the president on health care, but was shut out in the crucial early months as the dysfunctional White House came to be known as the "black hole."

Bill Clark/CQ Roll Call Group/Getty Images The "grand bargain" by health insurers to support universal coverage to bring millions of new customers onto the insurance rolls was a starting point-and, later, most of what remained-of health care reform. The insurers' lead lobbyist, Karen Ignagni, initially broke with other health care providers to join the administration in pus.h.i.+ng for dramatic cost controls. Once the White House abandoned that position-its strongest bipartisan stance-the insurers became a convenient scape goat.

Bill Clark/CQ Roll Call Group/Getty Images.

In January of 2010, Scott Brown, an upstart state senator, shocked Ma.s.sachusetts and the country by winning a special election to take Ted Kennedy's seat. His win killed the Democrats' filibuster-proof majority in the Senate and sent health care reform into near chaos.

Robert Spencer/Getty Images.

Despite being excluded early on by White House officials, former Fed chairman Paul Volcker saw his ideas gain in popularity. The administration, reeling from Scott Brown's victory, hastily embraced his "Volcker Rule," an attempt to restructure parts of Wall Street, but "their hearts are not in it," Volcker complained, about making it into law.

Bloomberg/Getty Images.

FDIC chairman Sheila Bair, unaware of Obama's interest in closing and restructuring Citibank, pushed to execute just such a plan. Her efforts were met with strict resistance from Treasury Secretary Geithner.

Bloomberg/Getty Images.

BlackRock CEO Larry Fink, often called the King of Wall Street, had over $3 trillion in a.s.sets under management and $9 trillion he oversaw, mostly of toxic a.s.sets he priced and managed for the government. In September 2010, Emanuel put forward Fink as a replacement for Summers and ushered him into the Oval Office.

Bloomberg/Getty Images.

Gary Gensler, a former Goldman Sachs executive named chairman of the Commodities Futures Trading Commission, pulled a "Nixon to China" in becoming an outspoken advocate for regulating a vastly profitable derivatives industry at the center of the global financial meltdown. This placed Gensler on a collision course with Wall Street's largest banks and their tens of billions a year in derivatives-related profits.

Bloomberg/Getty Images.

Summoning Goldman Sachs executives, led by CEO Lloyd Blankfein, to contentious hearings before the Senate in April 2010 recharged the financial reform debate. Here costumed activists from Code Pink sum up the widespread antipathy toward Wall Street that senators would try to harness.

Privately Held Photograph.

In spite of overwhelming public support for fundamental financial reforms, the Dodd-Frank bill, signed into law in July 2010, added regulations and capital requirements but left the industry largely as it was in 2007. From left: Vice President Joe Biden, Speaker Nancy Pelosi, Majority Leader Harry Reid, President Obama, Senator Dodd, and Representative Barney Frank (D-Ma.s.s.).

Saul Loeb/AFP/Getty Images.

Obama holds a Rose Garden press conference with Treasury Secretary Tim Geithner and Harvard Law School professor Elizabeth Warren in September 2010 to announce that Warren would help "stand up" the new Consumer Financial Protection Bureau, but not be its first director. Warren, who came up with the idea herself, became a lightning rod for embracing "the kind of forceful activism," as one White House official later said, "that some people had expected to see in the president."

Bloomberg/Getty Images.

In spite of the success of his campaign, Obama showed real weakness in managing his own White House. After historic midterm losses in the 2010 election, interim chief of staff Pete Rouse helped restructure the White House to fit Obama's needs. Here Rouse looks on in January 2011 as the president announces his new chief of staff, Bill Daley.

Win McNamee/Getty Images.

By early 2011, Obama felt that his understanding of the presidency, and the uses of "confidence," had grown, and that he had grown with it. Debates are sure to rage-and history, finally, to judge-whether this represents evolution or dangerous compromise.

Chip Somodevilla/Getty Images.

Part II.

HOME ALONE.

8.

A New Deal.

Obama ascended to the presidency channeling FDR. Like the longest-serving American president, Obama also arrived in the middle of economic crisis-albeit several months, not several years, after it began. Just as Roosevelt's administration set the standard for progressive agendas in the prior century, Obama hoped his would build on that foundation and then raise its own high bar for progressive agendas in the young new century.

Roosevelt laid out a famously aggressive program for his first one hundred days in office, pa.s.sing, in this period, many of the laws that now define his presidency. With a huge wind at his back, he saw Congress accede to virtually all his priorities. In addition to the Emergency Banking and Gla.s.s-Steagall acts, which rapidly stabilized the banking industry, he established the Civilian Conservation Corps and Tennessee Valley Authority and, in addition, pa.s.sed the Farm Credit, Truth in Securities, and National Industrial Recovery acts, among others. A few of Roosevelt's signature laws would come later, but considering that his term in office lasted for more than twelve years, it is remarkable just how much of what now comprises Roosevelt's legacy came in his first three months.

The hundred-day precedent has been the legislative standard for presidents ever since, so much so that Hillary Clinton mapped out her hundred-day strategy during the primary campaign. Obama acknowledged that he'd been studying Roosevelt's first hundred days when he arrived at the White House, mentioning books-including The Defining Moment, an FDR biography by Jonathan Alter-he was reading. Like FDR, Obama had tools of action to work with: overwhelming popular support, Democratic majorities in both houses of Congress, and the lat.i.tude afforded by crisis.

Yet the transition's heavy pregame planning meant that much had already been sketched. The pre-inaugural blueprint for financial reform-at this point a closely held doc.u.ment-laid out a fairly conventional set of changes that preserved the current structure of the financial and banking industries while largely beefing up the power of regulators to try to spot systemically dangerous inst.i.tutions before they created a crisis, and granting them "resolution authority" to handle collapses such as Lehman in an orderly, bailout-free way. The stimulus plan, at roughly $800 billion, was similarly shaped by mid-January to be a middle-ground proposal that could curry bipartisan support. The bill, called the American Recovery and Reinvestment Act of 2009, was actually less ambitious than it might have looked at first blush. It was something of a hodgepodge, a hastily built plan that reflected the competing and unresolved ideas coursing through the barely formed administration.

It wasn't as though the recession, and the need for stimulus, was itself a surprise. While the speed of the economic downdraft was startling, the question of how to construct an effective stimulus had been a subject of public discussion for almost a year.

Because states were so short on funds already, a lot of the money they'd receive would end up simply covering their normal budgetary outlays, saving the jobs of teachers, firefighters, and police officers. The tax cuts-going equally to all income strata in a nod to Republicans-were not as stimulatory as a host of other, more immediate direct-aid proposals in that many higher earners would use their bonuses to pay down debts or boost savings. Much of the infrastructure spending, meanwhile, was destined to languish unused, as it was made clear, even during the transition, that there were limits to how quickly money could be spent. Obama would own up to these concerns a year and a half later, admitting that he had learned "there's no such thing as 'shovel-ready' projects." Actually, he'd been warned of this well ahead of the bill's unveiling.

Even Alice Rivlin, the famously clear-eyed economic adviser from early in the Clinton administration, was sounding an alarm after the proposal's outlines became clear in late January. "A long-term investment program should not be put together hastily and lumped in with the anti-recession package," she said, in a widely covered speech at the left-leaning Brookings Inst.i.tution. "The elements of the investment program must be carefully planned and will not create many jobs right away."

As a top official later said, looking back, "We should have spent more time thinking about where the money was being spent, rather than simply that there was this hole of a certain size in the economy that needed to be filled, so fill it. How each dollar is spent is almost as important as the gross number." Another senior White House official acknowledged that, while there was a need for speed in getting something pa.s.sed, "there's no excuse for poor conceptualizing."

Hastily constructed policy was matched by miscalculations of political strategy: all the accommodations to conservative principles and practice in the plan were never exchanged for hard commitments. On the way to his inauguration, Obama got word that Republicans in the House had committed, as a bloc, to oppose his stimulus plan.

But that was all before he raised his right hand. Obama's predict-and-prepare navigation system-that finely tuned capacity to prefigure the outcomes, political and historical, before each footfall-would now begin to struggle with something that simply can't be predicted: what it feels like to be president.

Duly sworn in and pacing the Oval Office-ushered there by enthusiasts whose ardor seemed immune to his efforts at expectation management-Obama began, from his first minutes in office, to improvise with his new, just-elected ident.i.ty.

He was, after all, now the president. But how should a president, especially an inspirational figure named Barack Hussein Obama, act in a time of crisis?

A day after the inauguration, the president's top domestic appointee took his first tentative steps into the blinding lights.

The demands of the job were daunting, greater, in many ways, than that of any recent Treasury secretary-and Tim Geithner's experience was mostly in back rooms with bankers.

This was clear during the transition, as it was obvious that there'd be a mismatch between Geithner's performance skills and the challenges that awaited him. There were several extended prep sessions for his confirmation hearings. Other key players during the transition, many of whom would soon a.s.sume their senior positions, fired questions at Geithner, attacking his recent action to bail out the banks, his positions on all but imponderable issues of regulation, his personal beliefs and history. "Are they really going to ask me this kind of stuff?" he groused after one heated exchange. Yes, and maybe worse, everyone agreed. Summers, feeling protective of anyone who once served under him in Clinton's Treasury Department, offered sage advice: "Don't anyone admit we did anything wrong," he said during the prep sessions. Summers was referring to that administration's late-1990s moves to undercut what was left of Gla.s.s-Steagall and then block the regulation of derivatives. This stance, of course, was of sufficient import that it might have merited presidential review and some political a.n.a.lysis. Obama, after all, had selected for his top domestic officials two men whose actions had contributed to the very financial disaster they were hired to solve.

It wasn't as though Obama hadn't heard pointed concerns on this very issue. At a meeting in December of 2008, Byron Dorgan, the longtime North Dakota senator who'd been a leader of the Democrats, used unusually direct language with the then president-elect about his top economic selections. "You've picked the wrong people," he said to Obama, citing Geithner and Summers, both of whom Dorgan knew. "I don't understand how you could do this. You've picked the wrong people!"

Tim Geithner walked into the Hart Senate Office Building, just a block northeast of the Capitol Dome, for his 10:00 a.m. confirmation hearing on January 21. The city was still collectively hungover from its frigid revelry, with scaffolding being disa.s.sembled and mountains of trash being hauled away. By the time Geithner arrived at his hearing it wasn't even thirty degrees outside, but the Obama team had been working overtime for weeks to make certain he received a warm reception that morning from the Senate Finance Committee.

Again they turned to Paul Volcker, who sauntered into the hearing room on Geithner's heels to give the young regulator his endors.e.m.e.nt, even if it gave committee members a glimpse of what a Volcker Treasury might have looked like. Volcker's a.s.suredness was unmistakable. Fussing with his microphone in response to Max Baucus's effusion of what a privilege it was to have him appear, Volcker quipped, to big laughs, that he supposed it'd "be even more of a privilege if you could hear me," and then provided the gravity of a bona fide public-sector bigfoot of the sort America had not recently seen: "You know, a good many years have pa.s.sed since I last appeared before this committee, but during all of that time there's never been a more critical time for the American economy and particularly for financial stability. And that's true not just in the United States, but globally. To put it starkly, we are in a serious recession with no end clearly in sight. The financial system is broken. It's a serious obstacle to recovery. There is no escape from the imperative need for the federal government to come to the rescue to right the economic and financial s.h.i.+p of state. The hard fact is several trillions of dollars will be necessary to be committed in a combination of budgetary expenditures and various guarantee and insurance programs and extensions of credit by the Federal Reserve."

Several trillions of dollars. A true and stunning figure that no one had bothered, up to this point, to fix precisely.

After a few minutes, he turned to the young nominee, with an elegantly pa.r.s.ed endors.e.m.e.nt. "Now, I can't reasonably claim that any one person is absolutely indispensable, but as you address this nomination-as you address his nomination, consider that Mr. Geithner brings unique qualifications in terms of hands-on experience, recognition in financial markets, and the confidence in which he is held by the new president of the United States."

Over the next two hours, there were times when Geithner clearly wished his mic had been off as well. He was conspicuously unprepared for prime time. Despite his demonstrable knowledge of regulatory process, he was squirrelly and inarticulate. In private, one-on-one, he could be charming, witty, and thoughtful, but in public, he was surprisingly arrhythmic, sometimes even fumbling over the basic financial lexicon.

It was understandable if his nerves were already frayed. For the past two weeks a senior Obama aide, Jim Messina, just named deputy chief of staff under Emanuel, had been locked in negotiations with his former boss, Max Baucus, over Geithner's future. Messina was once chief of staff to Montana's conservative Democratic senator, who now chaired Finance and often said he considered Messina "like a son." That history would now prove crucial. Geithner owed back taxes, something revealed the previous October to Obama's team as they vetted him as a prospective appointee. He'd improperly reported compensation when he worked from 2001 to 2004 for the IMF. He'd also deducted his children's summer camps as a dependent expense. In sum, he had failed to pay $34,000 over a several-year period. Such oversights for an official slated to oversee the IRS would have been fatal for any number of past Treasury secretary appointees-raising the fire-or-ice choice of having to admit to either fraud or incompetence. Geithner went with the latter, saying he'd filled out his taxes using the software program TurboTax and had simply made a mistake.

In the midst of an economic crisis, however, it was time to cut deals. Baucus kicked off the hearing by preemptively relieving Geithner of responsibility in his tax mishandlings, calling them "innocent mistakes" and "sufficiently corrected," and then pushed the discussion along to the substantive issues framed by Volcker.

But Geithner soon found himself in deep waters.

One committee member who wasn't interested in cutting any deals with the White House waited to pounce. Was.h.i.+ngton's progressive Democrat Maria Cantwell, a former businesswoman who was once a top executive with Internet media streaming giant RealNetworks, had learned the hard way about lax regulation and the destructive possibilities of "financial innovation."

Not long after she arrived in the Senate in January of 2001, Cantwell was drawn into a local dispute that soon went global. Enron, the darling of Wall Street when she took office, was managing the world's energy markets using many of the same derivatives strategies and trading tricks that would, years hence, collapse the real estate markets. Enron had, in essence, created a host of proprietary platforms for the trading of energy derivatives, complex securities that derived their value from a.s.sets such as barrels of oil and cubic feet of natural gas, or the antic.i.p.ation of such hard a.s.sets from oil and gas leases. Acting as the middleman-market maker, proprietary trading adviser, manager of electronic derivatives exchanges-the company exerted enormous, and enormously profitable, influence over the world's energy market. Was.h.i.+ngton state's energy producers, who saw stunning price hikes (which Enron profited from), thought this influence was improper. Cantwell, fighting on behalf of the companies and the state's strapped ratepayers, was told countless times by Enron and its Wall Street "efficient market" supporters "that this was too complicated," she'd recall, "for anyone like me to understand. That 'anyone' meant a woman."

It also might have meant "a senator." Cantwell was virtually alone in those days fighting Enron. In late 2001 the company collapsed in the largest fraud in U.S. history, having used its market might to pump up earnings, cook its books, and defraud parties on all sides of the trades it controlled. Enron kept many of these activities hidden with the use of SPVs, or special-purpose vehicles, held off the balance sheet in much the same way that CDOs were kept in off-balance-sheet SPVs and funded by repos.

"In a ten-year-period of time, with one major regulatory loophole, derivatives have grown from being a $95 trillion industry to a $683 trillion industry . . . in ten years! This is what we are in America now," she said, a huge derivatives market.

Of course, Enron was just the start. Cantwell's state would take one of the most serious blows from the next crisis to emerge from derivatives trading and financial hubris. On September 25, 2008, with Paulson's TARP proposal on the table, the government seized the bank holding giant Was.h.i.+ngton Mutual and placed it into receivers.h.i.+p of the FDIC. The catalyst for the action was an old-fas.h.i.+oned bank run in which $16 billion in deposits were withdrawn over a ten-day period, at that time nearly 10 percent of the bank's total deposits. JPMorgan Chase, ever proactive in the public-private dance, purchased WaMu's bank subsidiaries from the FDIC for $1.9 billion.

The following day, September 26, WaMu formally filed for Chapter 11, sending shock waves from Cantwell's state to the wider country.