As this goes to press, I’ve just finished reading Michael Lewis’ The Big Short, a gripping inside account of the 2008 Wall Street collapse as it pertained to the subprime mortgage market. Lewis (author of Moneyball and The Blind Side) looks at the endemic corruption and corrosion of Wall Street through the stories of the few shrewd investors and money managers who saw the housing collapse coming from miles away. One in particular was Mike Burry, an odd, reclusive, Asperger’s-afflicted stock picker who set up his own hedge fund in California and won big betting against the subprime market. There is an especially salient passage in the last few pages of the book that nicely encapsulates what went wrong at the systemic level:
“The people in a position to resolve the financial crisis were, of course, the very same people who had failed to foresee it: Treasury Secretary Henry Paulson, future Treasury Secretary Timothy Geithner, Fed Chairman Ben Bernanke, Goldman Sachs CEO Lloyd Blankfein... They had proven far less capable of grasping basic truths in the heart of the U.S. financial system than a one-eyed money manager with Asperger’s syndrome.”
When Wall Street collapsed in 2008, the reckless and immoral speculation of big time bond traders generated massive losses for the major investment banks and financial firms. All of them were at risk. Then the government stepped in to bail them out, essentially transferring risk from the institutions that created it to the American taxpayer, who lacked even the most basic understanding of what was happening beyond the vague fear of another Great Depression. Both Bush and Obama signed off on financial policies that absolved Wall Street of all responsibility for its colossal mistakes – and no differences between their stances on the Iraq War or gay marriage affected their willingness to hand a blank check to the very same people who put us in this mess. Most recently, in late November, we learned of a secret $7 trillion (yes, with a ‘T’) loan program the government extended to big banks after the $700 billion TARP bailout.
It is, as Lewis succinctly puts it, “free money for capitalists, free markets for everyone else.” The economic system on Wall Street scarcely even deserves to be called capitalism anymore – it’s more like a social welfare state for compulsive high stakes gamblers and the sycophantic bean counters who (just barely) babysit them.
Yet somehow this culture of greed often finds its most ardent defenders among the real capitalists, the hundreds of thousands of small and independent business owners who make our economy stronger. If you actually create jobs and provide at fair market price a good or service that has some social utility, you’ll be taxed and regulated half to death. Yet if you spend all day in front of a Bloomberg terminal playing Monopoly with other people’s money, the government will trip over itself to make your job easier and your bank account bigger.
Though I may not agree with everything it espouses, I don’t understand why the Occupy movement doesn’t find more sympathy among regular taxpayers and business owners. It’s exactly this welfare system for Wall Street that inspired their protests. How can people be so incensed by a bit of rabble rousing, yet seemingly reserve little if any rage for the idiots and criminals who drove our economy off a cliff then walked away unscathed and richer for their troubles? Those protesters have as much right as anyone to be on Wall Street. They’re the American taxpayers, and they bought that damn street.