The Screwed Election

Wall Street Can’t Lose, and America Can’t Win

Everyone hates the big banks—except the two candidates
running for president.

Joel Kotkin on the bipartisan triumph of crony capitalism.

By Joel Kotkin
The Daily Beast
August 10, 2012

Everyone hates Wall Street.

About two in three Americans do not think what’s good for Wall
Street is good for America, according to the 2012 Harris poll, but
do think people who work there are less “honest and moral than
other people,” and don’t “deserve to make the kind of money
they earn.”

Confidence in banks is at a record low, according to Gallup, as
they’ve suffered the steepest fall in esteem of any American
institution over the past decade.

And people have put their money where their mouth is, with
$171 billion leaving the stock market last year alone, and 80
percent of Wall Street communications executives conceded
that public perception of their firms was not good.

Americans are angry at the big-time bankers and brokers, and
yet, far from a populist attack on crony capitalism, Wall Street
is sitting pretty, looking ahead to a presidential election that
it can’t possibly lose.

They have bankrolled a nifty choice between President Obama,
the largest beneficiary of financial-industry backing in history
and Mitt Romney, one of their very own.

One is to the manner born, the other a crafty servant; neither
will take on the power.

Think of this: despite taking office in the midst of a massive
financial meltdown, Obama’s administration has not prosecuted a
single heavy-hitter among those responsible for the financial crisis.

To the contrary, he’s staffed his team with big bankers and their
allies.

Under the Bush-Obama bailouts the big financial institutions have
feasted like pigs at the trough, with the six largest banks borrowing
almost a half trillion dollars from uncle Ben Bernanke’s printing
press.

In 2013 the top four banks controlled more than 40 percent of
the credit markets in the top 10 states—up by 10 percentage
points from 2009 and roughly twice their share in 2000.

Meantime, small banks, usually the ones serving Main Street
businesses, have taken the hit along with the rest of us with
more than 300 folding since the passage of Dodd-Frank, the
industry-approved bill to “reform” the industry.

Yet past the occasional election-year bout of symbolic class
warfare, the oligarchs have little to fear from an Obama victory.

“Too big to fail,” enshrined in the Dodd-Frank bill, enjoys the
full and enthusiastic support of the administration.

Obama’s financial tsar on the GM bailout, Steven Rattner, took
to The New York Times to stress that Obamians see nothing
systemically wrong with the banking system we have now, blaming
the 2008 market meltdown on “old-fashioned poor management.”

“In a world of behemoth banks,” he explained to we mere mortals,
“it is wrong to think we can shrink ours to a size that eliminates
the ‘too big to fail’ problem without emasculating one of our most
successful industries.”

But consider the messenger.

Rattner, while denying wrongdoing, paid $6.2 million and
accepted a two-year ban on associating with any investment
adviser or broker-dealer to settle with the SEC over the
agency’s claims that he had played a role in a pay-to-play
scheme involving a $50,000 contribution to the now-jailed
politician who controlled New York State’s $125 billion
pension fund.

He’s also expressed unlimited admiration for the Chinese economic
system, the largest expression of crony capitalism in history.

Expect Rattner to be on hand in September, when Democrats
gather in Charlotte, the nation’s second-largest banking city,
inside the Bank of America Stadium to formally nominate
Obama for a second term.

In a sane world, one would expect Republicans to run against this
consolidation of power, that has taxpayers propping up banks that
invest vast amounts in backing the campaigns of the lawmakers who
levy those taxes.

The party would appeal to grassroots capitalists, investors, small
banks and their customers who feel excluded from the Washington-
sanctioned insiders' game. The popular appeal is there. The Tea
Party, of course, began as a response against TARP.

Instead, the party nominated a Wall Street patrician, Mitt Romney,
whose idea of populism seems to be donning a well-pressed pair of
jeans and a work shirt.

Romney himself is so clueless as to be touting his strong fund-
raising with big finance.

His top contributors list reads something like a rogue’s gallery from
the 2008 crash: Goldman Sachs, JPMorgan Chase, Morgan Stanley,
Credit Suisse, Citicorp, and Barclays.

If Obama’s Hollywood friends wanted to find a perfect candidate
to play the role of out-of-touch-Wall Street grandee, they could
do worse than casting Mitt.

With Romney to work with, David Axelrod’s dog could design
the ads right now.

True, some of the finance titans who thought Obama nifty back
in 2008 have had their delicate psyches ruffled by the president’s
election-year attacks on the “one percent.”

But the “progressives,” now tethered to Obama’s chain, are
deluding themselves if they think the president’s neo-populist
rancor means much of anything.

They get to serve as what the Old Bosheviks would have
called “useful idiots,” pawns in the fight between one
group of oligopolists and another.

This division can be seen in the financial community as well.

For the most part Obama has maintained the loyalty of those
financiers, like Rattner, who seek out pension funds to finance
their business.

Those who underwrite and speculate on public debt
have reason to embrace Washington’s free spenders.

They are also cozy to financiers like John Corzine, the former
Goldman Sachs CEO and governor of New Jersey, whose now-
disgraced investment company MF Global is represented by
Attorney General Eric Holder’s old firm.

The big-government wing of the financial elite remains firmly in
Obama’s corner, as his bundlers (including Corzine) have already
collected close to $20 million from financial interests for the
president.

Record support has also poured in from Silicon Valley,
which has become ever more like a hip Wall Street west.

Like its east-coast brethren, Silicon Valley has also increased
its dependence on government policy, as well-connected venture
capitalists and many in the tech community have sought to enrich
themselves on the administration’s “green” energy schemes.

Romney, on the other hand, has done very well with capital
tied to the energy industry, and others who invest in the
broad private sector, where government interventions are
more often a complication than a means to a fast buck.

His broad base of financial support reflects how relatively
few businesses have benefited from the current regime.

Who loses in this battle of the oligarchs?

Everyone who depends on the markets to accurately give
information, and to provide fundamental services, like
fairly priced credit.

And who wins?

The politically well-situated, who can profit from credit
and regulatory policies whether those are implemented by
Republicans or Democrats.

American democracy and the prosperity needed to sustain it
are both diminished when Wall Street, the great engineer of
the 2008 crash, is all but assured of victory in November.


Joel Kotkin is a presidential fellow in urban futures at Chapman
University and a contributing editor to the City Journal.

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