Wall Street Plays Occupy White House

Joel Kotkin
Editor of NewGeography.com and Presidential fellow in urban futures at Chapman University

Crossposted on New Geography

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.

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