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It’s become common over the past year or two to note how well Wall Street is doing while Main Street is still struggling.
Sadly, that tale of two economies has resulted from a conscious choice by those at the very top levels of our nation’s financial and political elites.
The choice was inadvertently highlighted in a recent USA Today column by former House Speaker Nancy Pelosi. In that column, Pelosi describes some of the political dynamics surrounding the beginning of the bailout era five years ago.
In Pelosi’s telling of the story, public opinion was never mentioned once. That’s significant because public opinion was primarily focused on Main Street while the elites were focused on Wall Street. Those in power didn’t want to hear about anything but the financiers.
From the beginning, public opinion was hostile. The outrage was so strong that it eventually led to the creation of both the Tea Party and the Occupy movements. While Congress rarely listens to those it is supposed to represent, in this case, it couldn’t help but hear the shouting.
Stunningly, with both the Republican president and Democratic Congressional leadership pleading for $700 billion, Congress initially listened to Main Street and rejected the bailout legislation. That created panic among the elites, and the stock market fell almost 800 points the next day.
After the market reacted, Congress reversed course.
The legislators made a conscious decision to back Wall Street rather than Main Street. They voted to reassure the bankers and ignore the rest of us. Crony capitalism won. Free market competition lost.
Neil Barofsky, the special inspector general for the TARP bailouts, recounts the maddening tale in a great book, “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.”
In the aftermath, an argument erupted about who was to blame. Conservatives tended to point to government failures. Florida Sen. Marco Rubio said, “In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.”
Liberals pointed in the opposite direction. Mark Zandi, an economist whose analysis is frequently cited in support of Obama Administration policies said, “The biggest culprits in the housing fiasco came from the private sector, and more specifically from a mortgage industry that was out of control.”
A better understanding comes when you realize that the financial wizards and the government officials were on the same team.
One day Henry Paulson was chairman of Goldman Sachs, the next he was Treasury secretary. One day Robert Rubin was treasury secretary, the next he was running Citibank.
In the years since the bailouts, nothing has really changed. The biggest banks weren’t broken up; they’ve gotten bigger. They still require ongoing government subsidies to remain profitable.
That reality is bad enough. But what makes it even tougher is that the political class is proud of the two-tier economy they’ve created. In her column, Pelosi said bailing out the banks “required responsible, bipartisan cooperation and leadership.”
A better description would be to say that the bailouts forced the political class to make it clear that they listen to Wall Street over Main Street.•
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Rasmussen is founder and president of Rasmussen Reports, and a political analyst. Send comments on this column to ibjedit@ibj.com.
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