Wall Street is disdained in the court of public opinion — detested by the tea party on the right and the Occupy movement on the left. The public blames financial plutocrats for America’s economic plight more than either President Barack Obama or former President George W. Bush. Less than a quarter of all Americans, according to Gallup, have confidence in the banks, which vie for the lowest spot with Big Business and Congress.
But these angry voters are unlikely to get satisfaction in next year’s presidential election. In fact, things are looking up for the financial elite — which donated more to Washington politicians than almost any other sector of the economy over the past two decades. Wall Street can look forward to a bank-friendly administration if Obama is reelected — and perhaps even better conditions if either of the two leading GOP contenders, Newt Gingrich and Mitt Romney, wins the White House.
Despite his occasional remarks that decry “fat cat”’ bankers, Obama has effectively serviced the financial bigwigs. Bank prosecutions have declined markedly under Obama — to levels not seen for more than 25 years. Obama has even tried to derail aggressive bank prosecutions pursued by state attorneys general, most of them liberal Democrats.
This is remarkable since a considerable number of people on Wall Street should likely be in the dock — or in jail — for systematically ruining the national, and even global, economy. Instead, financial powers have enjoyed several big bonus years and have been on a spending binge at overpriced New York restaurants and tony boutiques. Struggling homeowners of middle America may be happy to know that the Manhattan luxury apartment market is running low on inventory.
Even while trying to exploit the Occupy Wall Street movement for political purposes, Obama still leads in financial sector donations, according to the Center for Responsive Politics. He has secured more cash from the financial elite, at this point, than all the GOP candidates combined. He has even raised twice as much as they have from Bain Capital, the venture firm co-founded by Romney. Why not give up on the white working class when you can sew up the Harvard and Wharton business school constituency?
Nor can we expect this pro-Wall Street tilt to shift in a second term. Obama’s virtual toadying to Wall Street is long-standing. He was the finance industry’s favorite against Hillary Clinton and then-GOP nominee Sen. John McCain (R-Ariz.). He may call them “fat cat” bankers, but Obama has been a kitten when dealing with financiers.
The president might not have much interest in conventional energy, manufacturing and industry — economic sectors that really create wealth and high-paying blue-collar jobs — but he has performed wonders to make sure the financial elite does well.
With his enablers, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, Obama has pursued low interest rates and easy money, policies favorable to large financial institutions. They get essentially free cash, which they then lend to the government and others at substantially higher rates. Now, to save the European banks, we hand out more money — not so much to save the old continent or our industries but our banks’ exposure to them.
Yet even Obama’s record of largely obsequious behavior is not enough for some Wall Street powers. Many financiers are now signing on with Romney. No doubt, the former investment banker seems a safe choice. He is, if you will, to the manor born and is expected to view things as the ultra-rich prefer. To him, the Occupy Wall Street movement has been largely looking for “scapegoats.”
Romney is a strong defender of the Troubled Asset Relief Program and the financial bailouts. He has even talked about lowering capital gains — though for only the smaller investor. Wall Street would likely be safe with Romney in the White House.
Gingrich is, as usual, harder to categorize — having said and done so many often contradictory things over the past few decades. Typically, after decrying the TARP bailout as “socialism,” Gingrich supported the bailout legislation. He also received compensation of more than $1.6 million in consulting fees from Freddie Mac, one of the big Washington institutions at the core of the financial crisis.
As a congressman, Gingrich consistently supported another key source of the meltdown — the wholesale deregulation of the financial industry. He has continued to play to Wall Street’s tune, opposing more stringent regulations. Gingrich symbolizes, as much as anyone, the interplay of the financial elite, Washington lobbying and politics.
More radical Republican challengers — those perhaps more likely to break the Wall Street consensus — seem to have self-destructed. The shifting tea party favorites — Rep. Michele Bachmann (R-Minn.) and Texas Gov. Rick Perry — have been undermined by their own demonstrated ignorance and a fatal attraction to the far-right social conservative agenda.
On the left, no one is likely to run against Obama. Politicians are perhaps unwilling to challenge the first African-American president — though many Democrats have grave misgivings about his gentry-friendly economic policy.
Next November, populists on both the left and the right are unlikely to get satisfaction from whoever wins the White House. In contrast, one faction or another of Wall Street is likely to win big.
The more traditionalist financial wing favors the GOP policies of greater deregulation, which allow for ever increasing risk-taking and agglomeration of assets. The “progressive faction” — which includes many Silicon Valley venture capitalists — tends toward Obama, who has favored its members with more than $14 billion in subsidies for green ventures and supports their status as arbiters of the future economy.
Yet those who seek a radical shift in economic policy, whether on the right or left, should not give up. Eighty-one percent of Americans are dissatisfied with the status quo, according to Gallup. Their trust in large economic and political institutions stands at the lowest ebb in a generation.
This anger could fuel a prairie fire that would force the restoration of competition to capitalism and reduce the power of the bipartisan patrician caste.
What is needed is some sort of tacit agreement among Americans — independents, tea partiers or Occupy Wall Street — for a break with the Wall Street-first policies of the political leaders of both parties. One crucial component could be a reform of the tax system — with flatter rates and capital gains equalized with income taxes, a policy that now overwhelmingly benefits the top 0.1 percent.
This does not necessarily mean more regulations — which the financial industry can easily game, in any case. We must instead make bankers more accountable for their failures. Let them feel the pain, and not allow them to prevail with the help of bailouts or to slip into their golden parachutes.
The whole concept of “too big to fail” — which puts smaller community-oriented banks at a severe disadvantage — should be eliminated. We also need to curb all the cozy special deals concocted for banks, energy companies, green ventures and other well-connected businesses.
Sadly, such reformist impulses won’t get any more support from a President Romney or Gingrich than from Obama. A break with the bipartisan Wall Street consensus will have to be forced on the unwilling financial plutocrats by a public fed up with the financial hegemon’s overweening power and destructive influence.
This piece first appeared at Politico.com.
Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.
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