Public anger at Wall Street begins to boil over
Caroline Baum has a good column today at Bloomberg.com regarding public anger in America. She correctly states that the American public is not just angry at Wall Street, but at what Wall Street represents in terms of special interests, favoritism, privatized profit, and socialized risk. The U.S. Congress should not misread public anger as an opportunity to get on their high horse; they too are to blame.
Recently, I suggested that the Tom Daschle episode represented a watershed in American politics that caught the Obama Administration flat-footed. The same anger was at work there and should serve as a warning for the President and his people.
Below is an excerpt from Baum’s piece. Enjoy.
There’s only one thing more revolting than watching Wall Street abuse taxpayer dollars: watching Congress bloviate about it.
Our elected representatives are gleeful at the opportunity to fan public outrage at bankers for their excesses — in part because it deflects attention from their own.
Whether it’s Senator Claire McCaskill, Democrat of Missouri, calling bankers a “bunch of idiots,” or Rhode Island Democratic Senator Sheldon Whitehouse proposing an “oversight court” to restrain Wall Street’s “massive self-indulgences,” Congress is perched on its high horse.
Public anger at Wall Street is both palpable and understandable. It’s also well-deserved.
Yet it would be a mistake for Congress to interpret that anger as a condemnation of capitalism and an endorsement of bigger government. If my e-mail is a reflection of popular sentiment, Americans are angry at Wall Street for gambling with other people’s money (and losing). They are angry at having to pay for the extravagances of others while they lived within their means. And they are angry at a system that privatizes profits and socializes risks.
They like President Barack Obama and want him to succeed. They want increased regulation of the financial sector, especially since they’re on the hook for past mistakes.
That said, the public doesn’t want government calling the shots. They understand — at least they should — that prices are a better way of allocating the economy’s scarce resources than government diktat. (If government was good at it, the Soviet Union would be flourishing.)
Government is nothing more than a collection of individuals acting in their own — yes, their own — self-interest, in much the same way that Wall Street does. The only difference, according to advocates of public choice theory, is that governments make public, not private, choices: They choose for us, in other words.
And we aren’t free to reject those choices. Whereas transactions in the private sector are voluntary, the government coerces us (threat of imprisonment) to pay for goods and services via taxes.
Politicians don’t earn a profit in the strict business sense for the services they deliver. Instead they monetize their connections, if not while they’re in Congress — passing laws that benefit favored constituencies in exchange for campaign contributions — then after they leave (see Daschle, Tom).
It is not my intention to exonerate Wall Street for its role in sinking the financial system. Nor do I wish to excuse the behavior of banks on the dole.
Wall Street has always had a deaf ear when it comes to what passes for acceptable behavior. In bad times, the deafness is even more glaring. Client retreats at high-end resorts, million- dollar office renovations, corporate jets shuttling board members across the country: Even before these activities were a matter of public interest (and taxpayer dollars), they were a manifestation of bad taste.
Still there’s something disconcerting, even comical, about politicians trying to cap compensation while “making a bunch of people feel better by beating up on rich people,” says Jim Bianco, president of Bianco Research in Chicago. “There’s a mechanism for correcting the excesses. It’s called the stock price and the board of directors.”
If you want to punish Wall Street, Bianco says, that’s how to do it.
The full article is about double this length. I have provided the link below.
Congress Misreads Public Anger at Wall Street: Caroline Baum – Bloomberg.com