Wall Street needs to change, not Obama
While no one said that reforming Wall Street would be easy for President Obama, the big-money backlash against his proposals has been surprisingly swift and screechy. In 2008, high finance donated about $40 million to Obama's campaign. As a recent editorial in The Post discusses, though, the financial sector "is suffering a massive case of buyer's remorse." There is a perception on Wall Street, The Post surmises, that Professor Obama doesn't have enough real-world business savvy to understand how high finance works, and the newspaper urges the president to cozy up to his one-time benefactors for the good of the nation.
But Wall Street clearly remains far more out of touch than Washington, and after reading some of the words emanating from the Masters of the Universe, one might plausibly wonder if America's lords of finance have spent the last three years living on Saturn.
Stephen Schwarzman, co-founder of the private-equity firm Blackstone Group, recently compared Obama's plans to tax private-equity compensation to Hitler's invasion of Poland in 1939. (He later apologized for the "inappropriate analogy," but he’s nonetheless going to have trouble living that one down.) And in his second quarter 2010 letter to investors, distributed on Aug. 27, Daniel S. Loeb, founder of the hedge fund Third Point LLC, wrote, "Perhaps our leaders will awaken to the fact that free market capitalism is the best system to allocate resources and create innovation, growth and jobs.… Perhaps, too, a cloven-hoofed, bristly haired mammal will become airborne and the rosette-like marking of a certain breed of ferocious feline will become altered. In other words, we are not holding our breath." Andrew Ross Sorkin quipped that Loeb’s letter "sounded as if he were preparing to join [Glenn Beck's 'Restoring Honor' rally] in Washington."
Why such hysteria and hyperbole? Shining through the ridiculous rhetoric is pure greed.
In a free-wheeling yet meticulous riposte to Loeb’s letter (that's worth reading in its entirety), Richard "R.J." Eskow of the Campaign for America’s Future explains, "By contributing to Republicans, with their discredited and destructive economics of nihilism, and by fueling the anti-regulatory rhetoric, Loeb stands to make more money than he would if government is allowed to take its regulatory responsibilities seriously."
In other words, though the system has collapsed for everybody else, it still ain't broke when it comes to making wealthy people wealthier. The Financial Times reported last week that in the U.S. banking sector, second-quarter earnings were the highest that they've been in nearly three years. With billions of dollars streaming back into their coffers, it's no wonder that the lords of finance want to ignore the lessons of the last eighteen months and derail Obama's campaign to rein in extravagance.
Moreover, in a sober Labor Day column for The Post, Harold Meyerson explains that rather than using earnings to help the sick economy, American corporations are instead "sitting on $1.8 trillion in cash.… They have pocketed their revenue, neither resuming lending (if they're banks), nor rehiring laid-off workers nor giving raises to those who have continued to work for them."
Corporate avarice is unconscionable these days, and even Loeb would have to admit that -- to understate things a little -- there's way more FDR to Obama than there is Marx. With the economy still in tatters, Wall Street needs to admit to itself that its road to excess has nearly bankrupted the nation. And the Daniel S. Loebs and Stephen Schwarzmans of the world need to realize that by abandoning Obama's reform efforts, they're steering us back onto it.
Katrina vanden Heuvel
| September 9, 2010; 1:43 PM ET
Categories: vanden Heuvel | Tags: Katrina vanden Heuvel
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