While TomP wrote an excellent diary today addressing Wall Street's threatened de facto capital strike, that diary only addressed part of the story. A detailed examination of the WSJ story entitled: Obama Dials Down Wall Street Criticism shows the bigger issues involved here.
Josh Marshall called the article "eye-popping" and recommended it to all. I've always liked TPM, but I've never agreed w/ him more than I agreed w/ him on that recommendation.
Let's start w/ the 3 opening grafs:
The Obama administration, after months of criticizing Wall Street, has been scrambling to woo top bankers and financiers to back its latest bailout plan.
In recent days, in spite of public furor over huge bonuses paid at American International Group Inc., the administration has concluded that it needs the private sector to play a central role in fixing the economy. So over the weekend, the White House worked to tone down its Wall Street bashing and to win support from top bankers for the bailout plan announced Monday, which will rely on public-private investments to soak up toxic assets.
But weeks of searing criticism by politicians and the public had left bankers leery of working with the government. After brainstorming about what to do about that problem, the White House resolved to try to take control of the debate, according to several administration officials. In weekend television appearances, President Barack and other administration officials tempered their criticisms of the financial sector.
Let's accept, for purposes of argument that the private sector must "play a central role in fixing the economy." Even accepting that argument, however, since when does Wall Street=The Private Sector? I thought that the private sector was comprised of stores and restaurants and other businesses that actually provide useful goods and services to people. I thought that it included manufacturing entities that employ people. Recent events, I assumed, foreclosed, once and for all, the argument that a tiny elite that does nothing but move money around should retain its privileged place in our society.
Sadly, that view appears to no longer be shared by the WH:
"Our great challenge is to make clear that we can't have an economic recovery without Wall Street, but these AIG bonuses make it that much harder," said David Axelrod, President Obama's top political aide, in a recent interview.
The administration "is adjusting to find the right balance" between politics and policy, says Thomas Nides, chief administrative officer at Morgan Stanley. "The White House understands that to have a healthy Main Street, you need a healthy Wall Street."
There are those of us out there who think that Wall Street has treated Main Street like a battered spouse for far too long. There are those of us who think that Greenspan's "bubblenomics" were a mistake from the start and that we need a major course correction. Those of us who feel that way are clearly not prevailing in the ongoing political debate, as representatives of UBS, BOA, JP Morgan Chase, and Wells Fargo are meeting privately w/ WH policy-makers:
In late February, the administration developed a new housing policy to help consumers stay in their houses. This time, it worked hard to get support from banks. Treasury officials invited executives from Wells Fargo & Co., Bank of America Corp. and J.P. Morgan Chase & Co., among others. Around the Treasury's biggest conference table, they hashed out how the mortgage plan would work in practice for eight hours, ordering in pizza.
White House aides returned to some key Wall Street fund-raisers who had helped give credibility to Mr. Obama's presidential campaign. Some had complained about lack of access in the early days of his White House, according to several of them. Among those called were Robert Wolf, president of UBS AG's investment bank, and Mark Gallogly, co-founder of Centerbridge Partners, a New York private-investment firm. Both of them are plugged into the financial world and could support the policy on Wall Street
Jamie Dimon, JP Morgan Chase CEO, has been expressly sought out for advice in crafting the financial rescue plan:
Early on, Obama aides had had little to do with Wall Street heavyweights such as J.P. Morgan Chase Chief Executive Jamie Dimon. On March 11, Mr. Dimon was ushered into the White House and Treasury Department, where advisers brain-stormed with him about how banks and markets would react to their emerging policies. The following day, at a White House meeting, business executives implored Mr. Obama to get credit flowing again. "All right," the president said, according to a transcript of the meeting. He'd have his people "talk to Jamie."
While I am a longtime "Who" fanatic, I'm not quite at the "meet the new boss, same as the old boss" stage yet. It's painfully apparent, however, as to which way the momentum is flowing at present, and it's not flowing towards the 99.99% of us who are not in the upper echelons of the financial sector. Plus, that sector has made it clear that it's just starting to flex its perceived muscle:
Bankers were shell-shocked, especially when Congress moved to heavily tax bonuses. When administration officials began calling them to talk about the next phase of the bailout, the bankers turned the tables. They used the calls to lobby against the antibonus legislation, Wall Street executives say. Several big firms called Treasury and White House officials to urge a more reasonable approach, both sides say. The banks' message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.
We the People are bailing out the banks after they, in essence, blew the rent money at the race track. They proved, once again, Keynes's adage about what happens when the capital development of a country becomes the byproduct of the activities of a casino. They won't accept our bailout, however, unless we agree not to restrict their beloved bonuses?
In any halfway rational universe, the financial sector would be on its knees begging for whatever help it could get. It wouldn't be setting terms for its acceptance of that help. Imagine, for a second, the UAW telling the WH that, if it wants to help the auto industry, it must agree that existing pay and benefits must be maintained. Such an approach would be roundly criticized by even the most ardent labor advocates.
Our entire economy is suffering in ways that it has not suffered in decades largely b/c of the greed, the short-sightedness, and the dishonesty of Wall Street. All the rest of us must suffer for their actions, but business as usual will continue for them? Didn't 53% of the American public make it clear on 11/04/08 that business as usual was no longer acceptable?
While this contest still has a long way to go, current developments are not encouraging.