Mark Gimein: Is Wall Street Evil?
[Mark Gimein writes about business and society for several national publications, including Slate, New York Magazine, New York Times, and Reader's Digest. ]
Americans have always hated the moneymakers, rather than hate themselves.
One-hundred and thirteen years ago, in the midst of the deepest depression of the 19th century, William Jennings Bryan, the Democratic nominee for president, addressed his party's 1896 convention with one of the most famous speeches in American history. The program Bryan called for in his "Cross of Gold" speech was what would now be called a "stimulus plan," based around taking the country off the gold standard. The issues are long since moot (we dropped the gold standard in 1935), but the resonance remains, because Bryan's real subject is not the gold standard but the Manichean struggle between the "idle holders of idle capital" and the "struggling masses" who produce the country's wealth.
Economies are cyclical, and therefore economic rhetoric is cyclical as well. The words and cadences differ, but the basic subject remains. Before there was Henry Waxman, there was W.J. Bryan. And before there was Merrill's John Thain, there was Charles Mitchell. Back in 1933, Mitchell, the president of National City—believe it or not, the predecessor of today's Citigroup—was called before Congress to explain why in the three years leading up to the crash of 1929 he paid himself $3.5 million (the equivalent of $40-million-plus today) in salary. The details of the crisis change, and the names change, but if you wait long enough—in banking, as in so many other things—history does repeat itself.
Financial crashes make fertile soil for moral dudgeon—if outrage were measured as part of our gross domestic output, the economy would be on a tear right now. Understandably so: The fire hose of daily news about Wall Street has revealed a startling level of cupidity and ineptitude in the banking industry. And yet as phenomenally blind as Wall Street bankers were to the signs of a tremendous crash, the rhetoric about Wall Street does at least as much to let everybody else off the hook as it does to reveal the causes of the meltdown. In the idiom of class war, it is always the folks on Wall Street who are to blame.
I've pointed out before that the banking crisis, though it's engulfed Wall Street, didn't start there. It started with banks giving out loans to people and companies that couldn't afford them backed by property that wasn't worth as much as the banks were lending. "Wall Street" is the shorthand that the media and politicans like to use for the banks, and as the rhetoric heats up, this gets transmogrified into "Wall Street and Washington," a convenient phrase whose subtext is that problems we now face are not the fault of the real America.
This line of assault on what some decades ago would have been called "the monied interests" is stubbornly resistant to facts. The explosion that started it all, Lehman, was on Wall Street, but the biggest commercial bank failure so far has been Washington Mutual, based not on Wall Street but in Seattle. Wachovia, a bank essentially divvied up when it was days away from failure, was based in Charlotte, N.C.—as is Bank of America. Ground zero for the mortgage innovations—"don't ask, don't tell" liar's loans and complicated option ARM mortgages with ballooning payments, was not Wall Street but the office parks outside Los Angeles, at the headquarters of companies like Countrywide and IndyMac.
But if you're really looking for a list of culprits, we're not nearly at the end. You can add in builders like KB Homes, who funneled homebuyers into overpriced new developments to lenders who wouldn't worry about the fine points. You can add in the National Association of Realtors, who spared no effort in talking the housing market up to its heights. Don't forget about Alan Greenspan, who missed the brewing credit fiasco as surely as the bankers did. (OK, Greenspan was in Washington.) Factor in the overoptimism of billionaire developers like Sam Zell, and the real estate investing patent medicine promoted by Rich Dad, Poor Dad author Robert Kiyosaki. Throw in the mortgage brokers in every city and small town who raked in commission after commission on mortgages their clients could never afford. Add in the millions of real estate brokers, large and small, who urged buyers to purchase a house that cost as much as the bank would give them and not a penny less....
Read entire article at thebigmoney.com
Americans have always hated the moneymakers, rather than hate themselves.
One-hundred and thirteen years ago, in the midst of the deepest depression of the 19th century, William Jennings Bryan, the Democratic nominee for president, addressed his party's 1896 convention with one of the most famous speeches in American history. The program Bryan called for in his "Cross of Gold" speech was what would now be called a "stimulus plan," based around taking the country off the gold standard. The issues are long since moot (we dropped the gold standard in 1935), but the resonance remains, because Bryan's real subject is not the gold standard but the Manichean struggle between the "idle holders of idle capital" and the "struggling masses" who produce the country's wealth.
Economies are cyclical, and therefore economic rhetoric is cyclical as well. The words and cadences differ, but the basic subject remains. Before there was Henry Waxman, there was W.J. Bryan. And before there was Merrill's John Thain, there was Charles Mitchell. Back in 1933, Mitchell, the president of National City—believe it or not, the predecessor of today's Citigroup—was called before Congress to explain why in the three years leading up to the crash of 1929 he paid himself $3.5 million (the equivalent of $40-million-plus today) in salary. The details of the crisis change, and the names change, but if you wait long enough—in banking, as in so many other things—history does repeat itself.
Financial crashes make fertile soil for moral dudgeon—if outrage were measured as part of our gross domestic output, the economy would be on a tear right now. Understandably so: The fire hose of daily news about Wall Street has revealed a startling level of cupidity and ineptitude in the banking industry. And yet as phenomenally blind as Wall Street bankers were to the signs of a tremendous crash, the rhetoric about Wall Street does at least as much to let everybody else off the hook as it does to reveal the causes of the meltdown. In the idiom of class war, it is always the folks on Wall Street who are to blame.
I've pointed out before that the banking crisis, though it's engulfed Wall Street, didn't start there. It started with banks giving out loans to people and companies that couldn't afford them backed by property that wasn't worth as much as the banks were lending. "Wall Street" is the shorthand that the media and politicans like to use for the banks, and as the rhetoric heats up, this gets transmogrified into "Wall Street and Washington," a convenient phrase whose subtext is that problems we now face are not the fault of the real America.
This line of assault on what some decades ago would have been called "the monied interests" is stubbornly resistant to facts. The explosion that started it all, Lehman, was on Wall Street, but the biggest commercial bank failure so far has been Washington Mutual, based not on Wall Street but in Seattle. Wachovia, a bank essentially divvied up when it was days away from failure, was based in Charlotte, N.C.—as is Bank of America. Ground zero for the mortgage innovations—"don't ask, don't tell" liar's loans and complicated option ARM mortgages with ballooning payments, was not Wall Street but the office parks outside Los Angeles, at the headquarters of companies like Countrywide and IndyMac.
But if you're really looking for a list of culprits, we're not nearly at the end. You can add in builders like KB Homes, who funneled homebuyers into overpriced new developments to lenders who wouldn't worry about the fine points. You can add in the National Association of Realtors, who spared no effort in talking the housing market up to its heights. Don't forget about Alan Greenspan, who missed the brewing credit fiasco as surely as the bankers did. (OK, Greenspan was in Washington.) Factor in the overoptimism of billionaire developers like Sam Zell, and the real estate investing patent medicine promoted by Rich Dad, Poor Dad author Robert Kiyosaki. Throw in the mortgage brokers in every city and small town who raked in commission after commission on mortgages their clients could never afford. Add in the millions of real estate brokers, large and small, who urged buyers to purchase a house that cost as much as the bank would give them and not a penny less....