Mayor 1%. Kari Lydersen
Chicago when Emanuel would take the helm.
Political Significance
Welfare reform, NAFTA, and aspects of the 1994 and 1996 crime and immigration bills would for years to come be blamed for negative impacts on regular Americans—especially African Americans, who disproportionately were caught up in the criminal justice system, and poor people, who struggled to survive with reduced public aid options. Clinton’s presidency would also be remembered as one of the most prosperous eras of the twentieth century, with low unemployment, a budget surplus, rising incomes and homeownership rates, national debt reduction, improvements in health indicators, and an overall expanding economy.70 Emanuel surely deserves credit for his role in some of these achievements. But it is hard to know exactly how much his efforts or values were reflected in the policies and priorities of the Clinton White House—as it would be during his time as President Barack Obama’s chief of staff.
Emanuel’s advice and actions in the Clinton White House were likely based in large part on his own ambition and drive to succeed at the tasks assigned him, and also his arguably keen judgment about what stances were most expedient for his boss. Emanuel was well known for abandoning past positions and principles if they became politically inconvenient, so it is difficult to say how much his work on NAFTA, welfare reform, and draconian aspects of the crime bill reflected deep-seated ideologies. However, all three measures do fit with the known and consistent aspects of Emanuel’s approach: his dedication to business interests and the free market; an emphasis on personal responsibility and choice; and his willingness to forge ahead with policies even in the face of intense opposition from labor unions, civil rights groups, and other interests that traditionally made up an important base of the Democratic Party.
Photo by Karen Cooper, AP.
Rahm Emanuel’s career as a private sector businessman was brief but lucrative.
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Cashing In
Though Emanuel had made his name fundraising for other candidates, as the millennium approached he was still young and “had political aspirations of his own, which necessitated some financial security,” as Nina Easton explained in Fortune magazine. Easton quoted Rahm’s brother Zeke saying, “Money is not the be-all and end-all for him. . . . But he knew he needed money so that wouldn’t be a problem while he was doing public service.”1
Hence in October 1998 Emanuel left the White House for the private sector. He had no formal business experience or even an MBA, but he did have a “golden Rolodex” from his days in the Clinton White House and all his political fundraising.2 He was hired by the investment banking firm Wasserstein Perella and Company in Chicago in 1999. Bruce Wasserstein was a major Democratic donor, and according to the New York Times he called on John Simpson, the firm’s Chicago manager, to meet with Emanuel in Washington. After a three-hour dinner Simpson made Emanuel an offer.3 Soon the Emanuel family packed up and moved back to Chicago, where they bought a home in the leafy Ravenswood neighborhood on the city’s North Side.
Demonstrating that connections, energy, and assertiveness can count for more than expertise in this field, Emanuel ultimately earned more than $18 million in just two and a half years as an investment banker. The New York Times broke it down: $900,000 his first year; almost $1.4 million the second year; and $6.5 million in another half year, plus about $9.7 million in deferred compensation, bonuses, and equity boosted when the firm was sold in 2001 to Germany’s Dresdner Bank.4 Even for the high-rolling world of investment banking, Emanuel was spectacularly successful; his earnings put him in the top 5 percent of the profession.5
Emanuel’s major deals included the purchase of the home alarm company SecurityLink from SBC Communications, then run by his longtime friend and former White House colleague Bill Daley. In that nearly $500 million deal Emanuel represented the Chicago private equity firm GTCR Golder Rauner, whose chairman, Bruce Rauner, knew Emanuel through mutual connections and had encouraged him to try his hand at investment banking. Rauner would later become a key adviser and public backer when Emanuel became mayor of Chicago.6
Emanuel also worked on the $8.2 billion merger of the utilities Chicago Unicom and Philadelphia Peco, which created Exelon, the parent company of Commonwealth Edison and one of the country’s biggest power corporations. Former Unicom and later Exelon CEO John W. Rowe knew Emanuel from his Clinton White House days and contacted him personally about the merger. Afterward, the new utility laid off 3,350 workers, more than a tenth of its workforce.7
Other companies headed by high-profile Democratic donors who became Emanuel banking clients included Slim-Fast, the aviation company Avolar, the Chicago Board Options Exchange, and Loral Space and Communications.8
Ron Suskind, a Pulitzer Prize–winning former reporter for the Wall Street Journal, described Emanuel’s banking success in the 2011 book Confidence Men: “Insofar as it was always clear that he’d return to government, the compensation makes sense, said one former investment chief, a fan of Emanuel’s, who now works in Washington: ‘Paying someone who will be a future government official a lot of money for doing very little? On Wall Street we call that an investment.’”9
Emanuel also profited by serving on several boards of directors, including the Chicago Mercantile Exchange.10 During Emanuel’s mayoral campaign eleven years later, the exchange’s parent group would give him $200,000, his biggest single campaign donation.11 In 1999, the Chicago Sun-Times noted, Emanuel joined the boards of Rxdrugstore.com and Beautyjungle.com.12 The Sun-Times also reported that Emanuel was paid more than $250,000 over two years in the early 2000s by the advertising agency Young & Rubicam, where he served on the board.
And in 1999 Mayor Daley appointed Emanuel to the board of the Chicago Housing Authority, the agency that oversaw the city’s troubled public housing projects.13 When Emanuel joined the board, the authority was in the process of launching a highly controversial overhaul known as the Plan for Transformation, which involved tearing down all the public housing high-rises and replacing them with “mixed income” developments that included a third each of market rate, affordable, and public housing.14 Although most people agreed the high-rises had become extremely dilapidated and dangerous, there was great outcry among residents and fair-housing advocates over the plan. The city didn’t comprehensively track whether residents displaced from the developments ever got new housing with the subsidized vouchers they were given.15 Meanwhile, in some areas, the transformation was attractive to private developers, who were able to build market-rate housing on plots near downtown or the lakefront. The plan had already been crafted by the time Emanuel joined the board, but it’s likely that authority officials saw his business and real estate connections as an important asset while the authority was making deals with developers.
Freddie Mac
During his sojourn in the private sector, Emanuel also served on the board of Freddie Mac, the government-sponsored private mortgage company whose problems contributed to the economic crisis beginning in 2007.16
The colloquially named Fannie Mae and Freddie Mac were created by Congress to promote home ownership. Fannie was launched in 1938 to help fulfill the promises of the National Housing Act of 1934. The idea was that Fannie would purchase government-insured mortgages from lenders and sell those mortgages to other investors—in essence acting as a mortgage dealer. As it turned out, Fannie didn’t always resell the mortgages. It soon became a major mortgage holder and was later authorized by Congress to build and maintain a portfolio by using federal and private funds and selling shares and bonds.
Freddie Mac was created in 1970 to purchase mortgages from Savings and Loan (S&L) institutions, and over time its operations basically dovetailed with those of Fannie Mae. In short, by decreasing risk for private lenders and by helping to create a secondary market for mortgages, Fannie and Freddie were meant to motivate lenders to offer mortgages to people who might not otherwise be able to get financing to buy a home.17
Freddie Mac started trading on the New York Stock Exchange in 1989. Like Fannie Mae, it was considered a private company even though it enjoyed closer ties with the government than other mortgage companies. Fannie and