Confidence Men Part 20

Another town, another speech. Only a week after the powerful health care address, its effect was already wearing off. In the days before the speech, Obama had repeatedly talked to Baucus-calling him over the weekend, as Baucus trolled Home Depot-asking him how close the Gang of Six was to an agreement on a plan that Obama could claim some owners.h.i.+p of. They'd all worked through the night. After months of waiting, with reporters camped outside Baucus's office, the fabled bipartisan compromise seemed so close, right up until the afternoon of the health care speech. Obama hoped it would be a prize, a bipartisan prize he could deliver from the lectern. It didn't happen. And a week later, it was as though nothing had happened-back to business as usual. Obama and half the Senate were now courting Maine's Olympia Snowe, hoping she'd be the sixtieth vote needed to break a Republican filibuster. It was deflating.

Obama had handed his political capital over to Max Baucus, the vanquisher of Daschle, and now the health care initiative was in shambles. Something might, at some point, emerge. But it would be a long, messy fight, and the dream of harnessing the breakthroughs in comparative efficiencies to reduce costs and expand coverage was mostly gone. In September, Orszag's and Obama's favorite integrated solution-to lower malpractice premiums if doctors used procedures within an evidence-affirmed "safe harbor"-died a quiet death. Doctors didn't like to have their hands tied. At this point, with general disarray, they had plenty of clout to bring over a few of their favorite Democratic congressmen.

But what stung the most was that Obama's powers of oratory and persuasion, at their very best, hadn't moved a single vote in the Senate.

Now it was time for another speech, on the other defining event of his presidency, this one by choice. At 11:45 Obama and his White House entourage slipped through the side entrance of one of America's most honored and auspicious structures: Federal Hall, a pillared, domed neocla.s.sical temple that was the site, in 1765, where delegates of nine colonies met to challenge the Stamp Act. They drafted a letter to King George III and the British Parliament protesting what they dubbed "taxation without representation." The Continental Congress of the Articles of Confederation had met here; George Was.h.i.+ngton was inaugurated on the steps, where a twenty-foot bronze statue of him now stands.

As Obama's team, including Geithner, collected themselves in a waiting room, the leaders of Wall Street milled about, convivially, in the main hall, with its marble floors beneath the tall dome. A year after their existential crisis, "too big to fail" had settled into what seemed like a day-to-day repose of "too big to worry." The well-groomed gathering of men, and a spicing of women, chatted about summer vacations to exotic locales, purchases, recent and upcoming, the latest news on shareholder suits (their liability policies would cover them). One prominent banker, who asked not to be named, said, "For Was.h.i.+ngton to not demand anything when it saved us, even stuff that we know is for our long-term good, was one of the stupidest moves in modern times. I figured Obama understood that-it wasn't a nuanced point-and that he'd act as we started to pull out of the abyss six months ago. But he didn't, and I don't know who to thank. I feel like I should go over and hug Tim. It's a shame we can't pay him, 'cause that's a guy who really earned a big-time bonus."

Not all of Wall Street actually did show up. On this day, an economic equivalent, in the minds of many Americans, to the first anniversary of 9/11, Lloyd Blankfein decided he had something more important to do. Jamie Dimon was also otherwise engaged.

At 12:10, Obama stepped to the lectern to perfunctory applause and delivered a scolding speech that no one much reacted to. Some of the men checked watches. The president's rhetoric, once enough to reduce strong men to tears, had already been shorted. After all, he'd just given a spellbinding address to a joint session of Congress last week and hadn't gotten one vote. With each word, the market value of his rhetorical capacity dropped.

By 12:50 the president was gone, off to a few other meetings in New York before Air Force One left at 3:00 p.m.

The younger men speed-walked to nearby offices or jumped in black sedans, leaving behind the older men, the last generation's t.i.tans, who ambled down the long steps to street level. On balance, they'd been pus.h.i.+ng for dramatic reforms since last fall. Leading them was Pete Peterson, the billionaire former head of Blackstone and commerce secretary under Reagan, who had spoken publicly and pa.s.sionately about how moving from partners.h.i.+ps to publicly traded corporations in the early 1980s-allowing partners to take their money off the table and replace it with other people's money, thereby severing the bonds of caution and shared risk-marked the moment Wall Street started to grow into a destructive force. "I know Tim Geithner very well and I've interviewed a lot of top people, in New York and Was.h.i.+ngton, and they all say that it'll take another crisis before anything changes up here," Peterson said.

Behind him was Volcker, who threw an arm around Pete's shoulder.

"The crisis should have lasted a little longer," he said. "It would have been better if Wall Street didn't pull out of it so soon. Given us more time."

And off they walk together, as reporters yell at them: "Did you like what the president said?" "What should reform look like?"

Scott Talbott, the ubiquitous spokesman for the Financial Services Roundtable, the trade a.s.sociation representing the one hundred largest banks, stood near the feet of George Was.h.i.+ngton, offering the industry's position. "We solidly agree with the president. We agree with creating a system risk authority to oversee the entire industry. We agree with a regulatory authority to resolve non-depository inst.i.tutions," meaning financial firms as compared to commercial banks. "And we agree with the idea of transparency to protect the consumer, but we don't feel the Consumer Financial Product Agency is the best way to do it."

The many agencies that regulate banks from Was.h.i.+ngton have their own consumer protection divisions, he elaborated, and those should simply be strengthened. Reporters crowded around and asked about changes in compensation, about making them more closely tied to long-term performance. Talbott said that firms were already doing that voluntarily. When pressed, he acknowledged just one was: UBS.

But if one firm does it and the rest don't, there will be flight from that firm to others.

"Okay, I admit, that is a challenge. But if you force them all to do it, well, that'd be an ant.i.trust violation!" Talbott added with a chuckle, surprising even himself.

A few feet away, belly up to a barricade, a few dozen people with signs held out hope that they might still glimpse the president.

Lynn Safford, with her husband, Dave, an advertising executive, and her son, Matt, was holding up a somewhat understated sign: "Regulate Government Spending." They were from Austin, Texas, and had just come up from Was.h.i.+ngton, where they'd joined Glenn Beck, Sarah Palin, Michele Bachmann, and a.s.sorted Tea Party leaders for the "9/12 March on Was.h.i.+ngton," a rally that drew tens of thousands of conservative activists to the capital for speeches and a show of political force. It was now clear that the Tea Party, founded a mere seven months before with a televised rant by CNBC's Rick Santelli, about how the government was "promoting bad behavior" by "subsidizing losers' mortgages," was building toward next year's midterm elections. It had already developed a seemingly strong gra.s.sroots organization, and was generating ongoing excitement, drawing new members, with media events televised by Fox News.

But the strength, and stickiness, of the movement was more in the excitement of its fast-forming community than in the slavishly transmitted visuals.

It's hard to know what ten letters President Obama was reading every morning, a practice that Axelrod said he did religiously to counter "his greatest fear, that he'll lose touch with the people." But he might have been edified, and forewarned, by reading about Lynn Safford's transformation into an activist.

She was a Glenn Beck watcher. She said she liked his pa.s.sion, and found herself "checking out some of the things he'd been saying on the Internet, and a lot of it was on the money." This had given her a feeling of both engagement and due diligence, albeit verifying the authenticity of a cable television character with often unsourced Internet data. But after a few months of watching and trolling, she'd asked herself, "How did we get to this place without me knowing it? Nothing was in balance anymore."

One day she ran out of her house in the early evening as her neighbor, a young father named Matt, was coming home from work.

"I said, 'How do you feel about the political arena right now?' He looked at me like 'why are you asking me about that?' I said, 'I'm not gonna sit in my house and scream alone.' Then, you know what Matt said? He said, 'I hate what's going on!' "

Matt and his wife would have joined the Saffords on the trip east, but they had a newborn at home.

The question of why Lynn was screaming and what Matt hated is a complex one. The Tea Party's platform is populist, both conservative and libertarian, endorsing lower taxes, a reduction of national debt, and a reduction in government spending, along with individual rights and an "originalist" interpretation of the Const.i.tution. But Lynn, like a lot of Tea Party activists, didn't offer much in the way of an actual program or coherent policies. Tea Partiers are often against things that are themselves opposites, and against pretty much anything that Obama does.

But policy or ideology doesn't really seem to be as much a driver of the party's growth as its members are themselves, in "being the change that they seek," to adapt Obama's phrase. Lynn had already listed a host of experiences in her weekend of activism, from stunning deals on hotel rooms, to chance, seemingly miraculous encounters with like-minded people-"I felt like she was my sister"-to a moment when she thanked someone who'd said he had never been thanked so warmly before.

This sensation, of a world br.i.m.m.i.n.g with possibility, was precisely what waves of Obama supporters had felt as they lifted him to the presidency. A key item of collateral damage from an overcommitted and disorganized White House was the oversight of not creating ways to keep Obama's populist gra.s.sroots organization involved in the current array of national debates. Inaction had created a vacuum. In this case, it was clear that populist energy-enlivened by the poor economy, the ravages of Wall Street, and the desire to confront an uncertain future with activism-had settled on the right.

On the evening of the Lehman anniversary, Carmine Visone booked the corner table on the patio at Bice. His table.

In the year since he'd stepped back from the window of his Lehman office, he had restored a bit of balance to his life. He wasn't sure what was next. He knew that, a year later, blaming Wall Street was not so simple. Santelli's screed, which had launched the Tea Party, struck Carmine, a lifelong Republican, in a place deep, where his angry, bricklayer father had permanent residence.

"Listen, guy, that house you got, you couldn't afford it. The car you got, the five of them you got, you knew you couldn't afford that."

After a year of hearing Wall Street blamed for every ill in America, Carmine channeled his dad on the issue of personal responsibility. It was something of an anniversary present to everyone who found themselves overextended and deep in debt, at the end of Wall Street's thirty-year credit supercycle.

"I submit to you, sir, that not only did you get what you deserve, but you got more than you deserve, so be grateful for the free ride that you had, because you never paid for it. So I'm asking you to give back what you didn't use, because you can't pay for everything that you did use, because somebody else is paying for it.

"You never belonged in that house, you never belonged in that car, you never belonged in those shoes, and you never belonged in that restaurant, because you never earned it.

"So don't blame me because I manufacture capital, okay? You, on a personal level, sir, have an obligation to manage your own f.u.c.king life, not me. The ocean doesn't get condemned if someone drowns in it, okay? You went in the water, you went in over your head, you didn't know how to swim, you ignored the signs, okay? Don't blame me.

"That's what the ocean does. The ocean floats people and the ocean drowns people, okay? Don't blame the ocean. You did it to yourself. And you wanna know something, too? Somewhere deep down in your soul you knew that going in. And you were trying to get away with it. You know you didn't earn it. No money down. No income verification. Okay? And you figured, 'Well, I figure I can carry the monthly note. It doesn't matter what I paid for it.' You don't look at the cost of these things; you look at the cost to carry these things. You're banking on the continuation of your ability to carry. Again, you don't even know what you paid for the car. Because you knew what the monthly note was. It didn't matter if you paid $1 million more or less for that house, because all that was an extra $300 in your monthly payment, so you were paying inflated prices, but it didn't matter to you, because the monthly payment was manageable. Until something happened, and all of a sudden the spigot was turned off and whatever it is that you were doing to create that personal income stream level, which, by the way was never ample . . . because you were banking on bonuses that you hadn't earned yet, stock options going up. Today's bills with tomorrow's earnings.

"Not only did you spend money you didn't have at the time, but you were spending money you never even got in the future. You were spending money that wasn't even created yet. You wanna blame me for that? Where's your responsibility? Your self-discipline? I have no sympathy. I have no sympathy because you never should have been there to begin with. You should have exercised restraint every step of the way. Just because the drug dealer is on the corner, you could have walked right past him. You bought the drugs. I didn't sell you the drugs, you bought the drugs."

14.

Mad Men.

The Obama presidency didn't end in the fall of 2009, but it came close.

"The worst period of his presidency," was the conclusion of Anita Dunn, reflecting on it more than a year later. "That horrific period in November . . . health care dragging on and on, economy is not looking good, horrible jobless recovery . . . that was a terrible time." She added, "Everyone was in a terrible mood."

This inefficacy had started to garner attention from the press. Lofty campaign rhetoric was now being contrasted with a stifling political stagnation. A mid-September poll had Obama's approval rating at just 47 percent, the lowest of his young presidency.

Dunn, the outspoken White House communications director, had been brought in to the West Wing in May to help the president navigate the rocky first few months of his term. "It was a mess," she said. Dunn quickly instigated a better scheduling system and fought, with futility, to heal the growing gender divide. It wasn't the first time she'd been brought in to alleviate such a tense atmosphere.

During the campaign, Dunn was the first female appointed to a serious campaign post. As a senior adviser and communications director, she was shocked to find that in spite of Obama's popularity with female voters, his campaign had more to do with frat house antics than third-wave feminism. Upon being shown a new campaign ad in production, Dunn watched with a quizzical look on her face.

"There isn't a single woman in this ad," she evenly observed. "I was dumbfounded. It wasn't like they were being deliberately s.e.xist. It's just there was no one offering a female perspective."

That was then. The ad was ultimately reshot, and more women were brought into senior campaign roles. But now in the White House, Dunn's concern grew as she saw similar gender issues, this time with even higher stakes and tensions, and plenty of women now in senior roles.

"The president has a real woman problem" was the a.s.sessment of another high-ranking female official. "The idea of the boys' club being just Larry and Rahm isn't really fair. He [Obama] was just as responsible himself."

The problem at hand was manifold. The schism going back to the campaign manifested itself in two distinct ways. On the one hand was the perception that Obama was a guy's guy, especially in his leisure time. Those coveted moments, not just on the basketball court but between meetings, were times when the president was at his most comfortable.

The second, more aggrieving divide lay in the fact that many women felt that the men, namely Summers and Emanuel, didn't play by the rules. The group of women even coined a term for these transgressions: "policy fouls." That Summers and Emanuel circ.u.mvented traditional policy routes and often left other key players out of the loop would alone have been cause for frustration. But when this was coupled with Obama's guy-to-guy att.i.tude and the testosterone aggression that accompanied these "fouls," women in the White House found themselves increasingly frustrated and feeling worthless.

"I felt like a piece of meat," Christina Romer said of one meeting that she had been deliberately boxed out of by Larry.

But the White House was relying heavily on the disconnect between perception and reality. The public face of the administration was as gender-progressive as any in history. Obama had surrounded himself with smart, a.s.sertive women in positions of traditional power. The team, a veritable murderers' row of women of private-sector and academic authority, was greeted with praise from feminist groups for its gla.s.s-ceiling-shattering diversity.

By the summer, however, the reality had grown dire. The cabal of men, which in addition to Emanuel and Summers included Orszag, Axelrod, and Gibbs (the latter two were considered to be "untouchable"), had mitigated the authority of the highest-ranking women officials as a result of their close personal connections with the president. As 2009 wore on, everyone had become cognizant of the internal schism, with Geithner privately concluding, "The perception is that women have real power, yet they all feel like s.h.i.+t."

That characterization, echoed by multiple senior officials, was painful and also unacceptable. The woman would do almost anything for the president, and carried on with few complaints. "But looking back," recalled Anita Dunn, when asked about it nearly two years later, "this place would be in court for a hostile workplace . . . Because it actually fit all of the cla.s.sic legal requirements for a genuinely hostile workplace to women."

At the time, though, they went through the available channels, trying to have their complaints heard. Along with Valerie Jarrett's office, the destination of choice was Pete Rouse's closet-like garret in the West Wing. One after another, the women came in. Rouse is an expert manager with a welcoming disposition. Each one arrived with the same plea: Do something.

Barney Frank got up early on Thursday, September 24. It was a big day. He'd started the week with hearings on key elements of financial reform. Instead of voting the whole package out of his committee at once, the plan was to get key witnesses to stand and deliver on specific areas and then vote each part-derivatives regulation, the proposed Consumer Financial Product Agency, resolution authority, systemic oversight-one by one.

Today was special: he was helping someone with their coming out.

After the president's Lehman anniversary speech ten days earlier, as other dignitaries schmoozed or tried to squeeze in a Manhattan lunch before boarding Air Force One, Barney Frank got to work. He had grabbed a cab north to Rockefeller Center for a secret meeting in Paul Volcker's office.

Frank knew that Volcker was aggrieved. He'd been left out of meetings by Summers. His President's Economic Recovery Advisory Board hadn't even had its first meeting until mid-May, and was already being ridiculed as an afterthought or, even more cynically, a place for Obama to stick all his second-tier donors and campaign advisers who hadn't "made the cut."

But it was more than just access. Frank had spent plenty of time with Geithner and knew that his position on regulating the financial sector was bank-friendly. That was why there had been so little opposition from the banking lobby. The lobby had lost a bit of clout, but it also could live, and maybe live well, with what the administration was proposing. If Frank was going to get something tougher out of his committee, he'd need some leverage. That was why he was sitting with Big Paul. They talked for a few minutes about Volcker's views. These were convincing, and far more activist-more interventionist-than the administration's. Would he consider coming before Frank's committee to speak his mind? Volcker laughed. Both he and Frank knew that the old Fed chairman was too important to Obama's credibility to be fired as head of the PERAB, especially for saying what most progressives, and plenty of old-time Wall Streeters, thought Obama himself should have been saying. So why not see if he could dare the president to be a bit more courageous in taking on the banks?

Which was what he did at 9:30 this morning, in front of Frank's committee. Specifically, he contradicted the testimony of Frank's star witness from the day before, Tim Geithner, who, selling the administration's plan, had said that certain "systemically important" inst.i.tutions should receive more intense oversight by the Fed.

No, that's a bad idea, said Volcker. "Whether they say it or not, that carries the connotation in the market that they're too big to fail," creating the problem of "moral hazard."

And it wasn't just a single point that Volcker refuted. In a carefully crafted three-thousand-word written statement, which he read aloud, Volcker dismantled much of the regulatory framework put forward by the administration: "The approach proposed by the Treasury is to designate in advance financial inst.i.tutions 'whose size, leverage, and interconnection could pose a threat to financial stability if it failed' . . . the clear implication of such designation, whether officially acknowledged or not, will be that such in whole or in part, will be sheltered by access to a Federal safety net in time of crisis; they will be broadly understood to be 'too big to fail,' " he said. "Think of the practical difficulties of such designation. Can we really antic.i.p.ate which inst.i.tutions will be systemically significant amid the uncertainties in future crises and the complex interrelations.h.i.+ps of markets? Was Long-Term Capital Management, a hedge fund, systemically significant in 1998? Was Bear Stearns, but not Lehman? How about General Electric's huge financial affiliate, or the large affiliates of other substantial commercial firms? What about foreign inst.i.tutions operating in the United States?"

His recommendation was to restore some version of the Gla.s.s-Steagall law, putting commercial banks back in their special category, where they stuck to more traditional banking activities in exchange for the federal guarantee. This would mean they could no longer have hedge funds or private-equity funds beneath their roof, and they would have to stop proprietary trading-that is, trading their own accounts alongside those of their clients.

"The point is not only the substantial risks inherent in capital market activities," he added, in an extraordinary pa.s.sage. "There are deep-seated, almost unmanageable, conflicts of interest with normal banking relations.h.i.+ps-individuals, businesses, investment management clients seeking credit, underwriting, and unbiased advisory services. I also think we have learned enough about the challenges and distractions for management posed by the risks and complexities of highly diversified activities."

In other words, much of what was now called the financial services business was rife with illegal, or quasi-legal, activity. Let's have at least one realm, commercial banks, that are federally insured and not part of that chicanery, rather than federally backing the largest or most audacious actors by terming them "systemically important."

The practical and political effect of all this was an open dispute between the Treasury secretary and the president's most prominent outside economic adviser, the head of his Economic Recovery Advisory Board.

By the time Volcker was in his car to the airport, media requests for interviews were already flooding in. And he was just warming up. He made a note to unearth a quote from the father of modern economics, Adam Smith, who'd wrestled with these same "too big to fail" problems in the eighteenth century: "He said something to the effect of 'I don't know what to do about the problem, except to just keep banks small'-I've got to get that citation." Volcker expressed admiration for Adair Turner, Britain's bank regulatory chief, and his recent statement about the latest breakthroughs in financial engineering, that it was crucial for a society "to recognize that [when] there is some profitable activity so unlikely to have social benefit that we should be voluntarily willing to walk away from it.

"You know, he wrote an essay about the origins of the crisis that ran a hundred and twenty-six pages, critical of what he called the quasi-religious dogma of finance-quite a wordsmith!"

It was Volcker on a tear. At Reagan National Airport, his a.s.sistant, Tony Dowd, a retired, fiftyish investment banker, had to run to the ticket desk to get their boarding pa.s.ses for the 12:30 Delta Shuttle. Volcker was oblivious, ambling forward, saying, "Obama is smart, but smart is not enough. Leaders.h.i.+p is another thing entirely, about knowing your mind enough to make real decisions, ones that last." Minutes later, Dowd was running down the breezeway. "Oh, G.o.d, I thought I'd lost you," he said, panting. Volcker barely gave him a look. "Over here, here's where we go," Volcker grumbled. After pa.s.sing through security, he was back on the president, some idea percolating, which hit its boiling point as he reached the gate. "He seems to feel he has all he needs in the clever Mr. Summers. Together they're both so very confident." He flopped into a chair; still fifteen minutes to boarding. Then he hit it, seeing the president plainly: "He's self-confident, too self-confident."

At that moment, Elizabeth Warren was emerging from her testimony before the Senate Banking Committee on issues concerning TARP and its mismanagement. Volcker was, in a way, joining Warren in a new flavor of celebrity-"regulatory dissident"-that Warren had begun working up back in mid-April, when she appeared on Jon Stewart's show. In eight minutes she laid out such a clear, elegant sketch of how Roosevelt-era regulations had been dismantled, unleas.h.i.+ng demons, that Stewart basically canceled the rest of the show and just had her talk. She went on for nineteen minutes in all, with periodic breaks, describing changes similar to the ones Volcker recommended. "I know your husband's backstage," Stewart cooed, as the show wrapped up. "I still want to make out with you."

Volcker visited Obama a half dozen times to make his case for tough-love reforms and to argue with Summers. Warren, whose 2007 idea for a Consumer Financial Product Agency was now a central plank of Obama's reform proposal, had not yet been granted such privileges.

Elizabeth Warren speed-walked from Senator Chris Dodd's hearing room to a perch near the great atrium in the Russell Senate Office Building.

Bloomberg Television wanted to interview her about the one-year anniversary of the TARP program and the fact that she had made a cameo appearance in Michael Moore's new movie, Capitalism: A Love Story. They opened by running the clip in which Moore asks where the $350 billion in TARP money thus far allocated had gone. Warren responds, "We don't know," at which point Moore does one of his quick cuts, making it sound as if the money was stolen. There is, not surprisingly, a bit more to that story. Warren was leading the charge against the Fed's secrecy oaths to the banks and nonbanks that had received the funds-oaths Treasury supported. Their position was that revealing who got the grants, which amounted to more than the total annual discretionary spending of the U.S. government, would undermine confidence in those inst.i.tutions.

Bloomberg, hoping to get her to react to Moore, got a bright smile and an evenhanded "there are important issues and I'll talk about them to anyone, anywhere with a camera." Then Warren ran through an artful precis on how the banks were still holding the toxic a.s.sets, and how that left them in a default position of continuing to use government grants and funding to do everything but lend money.

Afterward, she ran a few more rounds in the Senate before grabbing a salad in a cafeteria in the bas.e.m.e.nt of Russell.

"What I think about is a whole building of people like me. If we can get this thing off the ground, I'll recruit them. But the idea is out there. They'll come on their own. Because keeping people from getting taken-and they are being taken, just like someone broke into their house and stole their jewelry, or the TV, or the money they were saving for their kids' college-is a way to help people. Really help them. And that's why maybe you forgo some money you might make out in the world of 'make and sell' to come here-because this is public service as something of virtue."

She could have gone on like this all day, but she didn't.

She knew there was no clear precedent for some citizen, even a Harvard Law School professor, coming up with an idea for what government ought to be doing and, soon enough, sitting atop a bona fide federal agency built around her impulse in response to a crisis.

"I know I've become a lightning rod. Oh yes, I'm finding out that I'm drawing strong reactions from people in the administration who you'd figure would be on my team. If I get taken down, that's not a problem. Really, it's not, as long as there's an agency. Then an army will fill it."

Warren, after all, didn't even live in Was.h.i.+ngton, and soon she was striding down the breezeway at Reagan National, right where Volcker was two hours before. And like Volcker, she came full circle to Obama and Summers.

"You can't run a policy based on a misdirection, on a fiction," she said. "I don't know what the president is thinking. I don't see the president. He meets with bankers. He doesn't meet with me. But if he's involved in this at all, he's got to know that his angry words at Wall Street, at their recklessness and dangerous incentives in compensation, about how they do their business in ways utterly divorced from what's actually good for the economy-that he can't just say that sort of thing, and then dump money in their laps and be credible. Tim and Larry's whole plan is just like Argentina in the 1980s. There was this giant hole marked 'Banks' and the government just dumped money in that hole, as much as they had, while they lied about it. That's what Larry thinks: that the U.S. is Argentina!"

And then Elizabeth Warren started to sing "Don't Cry for Me, Argentina." She was doing this at one of the little standup tables near the gates, people pa.s.sing by on either side. Several started to applaud, and that seemed to egg her on, working the verse, with Larry Summers in the role of Eva Peron.

She shrugged and let out one of those big laughs. "Why not? He might understand things better as a woman."

By mid-October, all the providers had cut their deals. On the other side of the table was a conjunction of the White House team, led by DeParle; the Baucus team, led by Jon Selib (the senator's chief of staff); and Liz Fowler, a former WellPoint executive now on the Finance Committee's staff. Shuttling between the two groups was Messina. It was a straight pay-for-play arrangement. The subtext was a pricing formula: How much is it worth to you, provider, for the reform package not to deal seriously with the issue of cost, which stands to cripple your profits? Once a price is agreed upon, you pay a portion of it-often by agreeing to certain provisions for your Medicare and Medicaid disburs.e.m.e.nts-and those federal savings then pay for expanded insurance coverage. These deals were at the heart of the ten-year, $856 billion behemoth of a plan approved by the Baucus group in mid-September and now winding its way through the Senate.

Health care reform had officially become health insurance reform. The providers were no longer up nights worrying, and they certainly had not welcomed Ignagni back into their midst. She and the insurers were on their own. She was alone in saying what no one wanted to hear: that there was little real cost control in any of the bills.

She'd heard that inside the White House, aggrieved that the champions of coverage had killed his dream of containing costs, Orszag was calling Pelosi's House bill a "liberal fantasy" of glut and expansion.

Ignagni set up a meeting with him. The Senate bill, she contended, wasn't all that much better. AHIP had been working on the numbers for weeks, and they showed a significant rise in costs. Orszag could read data points on health care costs as well as anyone. Ignagni's numbers were interesting, no doubt. But as long as her data had the AHIP logo at the top of the page, its findings would be discredited.

So she opted for a third party: PricewaterhouseCoopers. When the accounting firm came back with numbers showing rising costs much like AHIP's, Ignagni contacted DeParle, ready to show her both the AHIP and the PricewaterhouseCoopers numbers. Hoping to stop the release of these figures in a public report, DeParle invited her back to the White House.

Again, Ignagni presented her findings. Obama's health care team was interested, but nothing changed in terms of the basic calculus they and Baucus were using. It was full steam ahead.

On Monday, October 12, amid the Senate's efforts to sell the Baucus proposal, the PricewaterhouseCoopers report was released. The bottom line: by 2019 Baucus's cost projections were undershooting the typical family premium by a whopping $4,000. "The report makes clear that several major provisions in the current legislative proposal will cause health care costs to increase far faster and higher than they would under the current system," Ignagni a.s.serted in a statement.

AHIP, now on the offensive, was prepared to circulate the report in advertis.e.m.e.nts and memos to congressional leaders. Nancy-Ann DeParle tried her best to deflate the report, snidely undercutting the legitimacy of PricewaterhouseCoopers by remarking that the firm "specialize in tax shelters. Clearly, this is not their area of expertise."

But the report was a potent weapon, easily swung by Republicans and some Democrats. Everyone in the provider community knew the White House wasn't focused on cost. Now that inattention was being called out publicly.

Behind the scenes, the White House expressed its acute displeasure to Pricewaterhouse, which does an enormous amount of business with the U.S. government. Then, on October 13, a day after the report's release, PwC issued a baffling reversal, distancing themselves from the study and claiming that AHIP had directed the consulting firm to focus on only certain aspects of the proposed bill.

Ignagni and AHIP were now seen as toying with the cost numbers to "kill the bill." Ignagni fought back with futility.

That Sat.u.r.day, after finis.h.i.+ng a run in the cold fall morning, Ignagni returned to her house to hear the president's weekly radio address. With Afghanistan, the economy, and joblessness all over the news, Ignagni was eager to hear what the president had to say about anything but health care reform.

"The history is clear: For decades, rising health care costs have unleashed havoc on families, businesses, and the economy," Obama said. "And for decades, whenever we have tried to reform the system, the insurance companies have done everything in their considerable power to stop us.

"It's smoke and mirrors. It's bogus. And it's all too familiar. Every time we get close to pa.s.sing reform, the insurance companies produce these phony studies as a prescription and say, 'Take one of these, and call us in a decade.' Well, not this time."

Ignagni could not understand what she was hearing, literally. She was legally deaf and required the use of a hearing aid. After picking up her aid off the kitchen counter and turning up the volume, she listened in more closely: ". . . those who would bend the truth or break it to score political points and stop our progress as a country." The president went on to accuse the insurance industry of broadly "filling the airwaves with deceptive and dishonest ads," deliberately creating reports, such as the PwC Senate bill study, "designed to mislead the American people."