President Obama is, when compared to Democrats over the last half century, objectively quite middle of the road. And yet the reaction from Wall Street and the halls of finance is one you’d think meant he was trying to bring capitalism to its knees. The President’s policies and tenure in office simply don’t explain the reaction. And I don’t think political spin does either. We need to look deeper into the political economy of the nation at large to understand itHow did we get here? Let's try to at least start with some observations.
- We should start by re-reading Keith Poole on polarization. The Cliff's Notes version is that partisanship increases in lock-step with income inequality, as the parties come to represent the "haves" and the "have nots" and respond to the needs of their constituents accordingly. Inequality has returned to levels not seen since the Gilded Age, if not earlier, and business leaders are the ultimate haves, so that's certainly a factor.
- Second, I think there are some real ways in which Dodd-Frank means that high finance will never again be as free-wheeling as it was in the mid-aughts. That's good for everyone else, but bad if you're a banker. Likewise, as best I can tell the Bush administration had the most lassiez-faire regulatory apparatus in the post-war era. So for any business--not just finance, but anything--that got used to having the EPA, DOA, DOL, OSHA, etc., accomplishing close to nothing, the Obama-era agencies are a kick in the pants. Things might feel awful for the business community, but if that's so, they got used to the cushy times during the Bush era way too quickly.
- Third, with a shrinking (or very-slowly growing) economic pie, people are crankier in general. If the economy were growing at 3% annually and we were arguing about how to split up the gains, it's much easier to come up with a solution that largely satisfies all parties. But instead we had several quarters of a shrinking economy followed by anemic growth. Under those conditions it's natural for everyone to be more pissed off than they otherwise would be.
- People want to be liked. Especially powerful people who think that everyone should like them. I'm reminded of a post by Atrios where he relays an off the record conversation he had with a Democratic Representative or Senator. The basic gist of the politician's remarks were "why do you say mean things about me/why don't you write about all the good things I do". The Big Swinging Dicks of the financial industry aren't much different. They want to make a ton of money all while everyone tells them how much good they are doing for the world. And here they are, confronted with a politician who's unwilling to play along, at least in speeches.
- When you are as rich as the guys badmouthing Obama, there's very little you can't have. You can't buy a 747, like Sergey and Larry. There might be some extremely high-priced real estate you can't afford. You won't be able to build a bigger yacht than Paul Allen. But that's about it. Still, money can't buy you love, even if you try, and Lord knows the finance industry has tried (and succeeded) in buying love in Washington. The badmouthing of finance means that their attempt to buy loved failed. And I'm sure we can all imagine how much the titans of Wall Street hate to fail.
- To a certain extent, the ability of the financial services industry to survive in its current form depends upon political support for the idea that the financial services industry in its current form is good for society. Which, I think at this point, it's clear that it isn't. Rather than matching risks with those best able to bear the risks, the bulk of what finance seems to be doing right now is obfuscating the actual amount of risk and identifying customers who are unable to see through the obfuscation. So any time the political system threatens to attack their line of business as not socially useful, it's an existential threat to their industry. Therefore even the mere suggestion that the status quo is unsustainable cannot be tolerated.
I'm not able to roll these observations up into a coherent point, but the basic theme here is that things have gotten tangibly more difficult for business in general and Wall Street in particular. Combine that with the direction of the economy, and the fact that love from Washington is one of the few things business leaders can't buy, and I think the situation isn't terribly surprising.