Today, we hear a lot of rhetoric from the Left about Wall Street especially from the newest poster child for these beliefs- [mc_name name=’Sen. Elizabeth Warren (D-MA)’ chamber=’senate’ mcid=’W000817′ ]. This self-described intellectual inspiration behind the Occupy Wall Street “movement” is all over the news and liberal blogosphere with chants encouraging her to run for president in 2016. Being the intellectual inspiration for a movement whose greatest achievement was crapping on a police car is certainly nothing of which to be particularly proud. Furthermore, while the mainstream media was portraying Tea Party rallies as a collection of loons, the fine folks camping in parks around the country were lionized. Of course, they could not clearly articulate exactly what they were protesting, but they knew it had to be something. A clue to that “something” comes from the folks and causes it attracted- a who’s who of Leftist causes from environmental activists, social anarchists, death penalty opponents, etc.
First, there is no single entity called “Wall Street.” Supposedly, they were referring to the big banks like Bank of America, Wells Fargo, CitiBank and others. But, the banking sector is only one of many that trade on Wall Street (although most trading is not done on the actual Wall Street). Instead, the protests were about capitalism itself which is “personified” by Wall Street. Never mind the fact that capitalism has improved the lives of millions in a shorter period of time than any competing economic system- it is “evil” and that evil comes in the form of rapacious banks and big conglomerates.
There was a lot of frustration after the housing bubble burst in 2007 and the stock market crashed in 2008 and rightfully so. But, one has to look at the true cause of that problem to see how misguided this anti-capitalist propaganda really is. Starting in the early 2000s, interest rates were held ridiculously low to the point that to not refinance a home would have been foolish. In effect, you had homeowners using their homes as ATMs. Coincidentally, we had two competing ideologies aiming towards the same thing- an ownership society. On the Right, there was support given the fact that property ownership tends to make one conservative. On the Left, there was support because it was placing minorities into the role of homeowners. Unfortunately and for whatever reason, many people who had no right having a mortgage were given loans which led to the risky subprime market explosion.
The problem in a nutshell is the government. By pumping cheap money into the system through the Federal Reserve, it simply fueled a housing bubble that was bound to burst. In 2004, then-President George W. Bush’s Treasury Department warned that this was unsustainable and although they could not stop banks from loaning money, they could mitigate the possible risk to taxpayers by reforming Fannie Mae and Freddie Mac. In fact, the liberal New York Times hailed this proposal. Yet, it was people like Chuck Schumer, Frank Dodd and Barney Frank resisting those efforts. One suspects that Warren would have been in that group. After all, those rapacious banks were putting minorities in a home (through predatory lending practices). For the banks, it was damned if you and damned if you don’t. That does not excuse those instances of actual predatory lending which should have been prosecuted, but that was only part of the cause of the problem.
We know the results. The resulting bubble burst and stock market crash led to TARP- a bank bail out of a huge magnitude. When Obama came into power with the backing of a Democratic Congress, bankers were raked across the coals. The problem as they saw it was the bank leaders who often took huge bonuses. I personally have no problem with a banker with a large bonus if they are successful, but they should not be rewarded for failure and many banks failed. Again, executive bonuses, although wrong in the case of failures, were a very small part of the problem.
Today we have great political theater in the rants against Wall Street. But someone has to pay for that theater and both the Democrats and Republicans have benefited from campaign donations from the banking sector. At least the Republicans are not hypocrites about it, but in both 2008 and 2012 the bulk of those donations went to the Democratic Party. The resulting Dodd-Frank bill institutionalized “too big to fail” instead of mitigating future problems. The law is a series of regulations that ties nicely into a progressive theme- central planning- which creates a distorted market which violates the laws of economics. Is it any wonder that the banking sector is probably the one sector that has recovered the most?
And the current star of this political theater is Warren. At every step and opportunity, she rants against the banks yet is a huge supporter of perhaps the biggest boondoggle- the Import-Export Bank- an entity which more than one banker has described as “free money in my pocket.” In fact, as part and parcel of this shining example of phony capitalism, the government has climbed in bed with big business and dictates the market and plans it. The result is that the big banks and businesses squeeze out smaller, start-up businesses. These smaller businesses are what we think of when we say “Main Street.” It is the government, by choosing winners and losers and distorting markets, that is at war with Main Street.
In a capitalist economy, there will be winners and losers. An unfortunate offshoot of the system is greed which is not a bad thing if not taken to the extreme. The primary goal of any corporation is to maximize profits so that stockholders see a return on their investment. Investors do not make investment decisions out of the common good, but for personal gain. It is the very nature of capitalism.
And contrary to popular belief on the Left, conservatives are not against regulations. We are against over-regulation or feel-good regulations that accomplishes nothing. Any regulation that creates transparency so that informed investment decisions can be made is welcome. But despite the presence of transparency, there will still be winners and losers. Conservative, free market advocates do not try to make everyone a winner and totally eliminate risk. Basically, transparency provides an equal opportunity for anyone to succeed…or fail. The reason is simple. Every example of a centrally planned economy has led to failure and a host of related problems.
Finally, behind those “Wall Street” corporations are millions of investors big and small. It could be your neighbor or your employer or even you. Everyone is Wall Street so when people like Warren attack Wall Street they are really attacking you.