Friday, May 21, 2010 - 3:27 PM
Analysts are trying to decipher the content and implications of the Senate's financial regulation bill. Noam Scheiber and James Pethokoukis have surprisingly similar takes, in that the bill doesn't directly address the "too big to fail" problem, though Scheiber thinks it does address the problem indirectly.
Both takes are worth reading. Touching on a point I have made previously, however, I was struck by this Pethokoukis point:
Wall Street has an enduring PR problem. Yes, big banks are unpopular. But it has gotten so bad that they may not be able to so easily counter their image issues with campaign cash. Getting Wall Street money now has a stigma attached to it like oil and tobacco money. Candidates like Meg Whitman in California and John Kasich are getting hammered for their Wall Street ties. The industry’s continued unpopularity will no doubt spawn further attempts to tax, regulate and restrict the sector.
If the public stays this outraged for this lomg, then Pethokoukis is right. The political problems of finance are becoming so great that we could be talking about a shift in social norms with regard to what is considered "honorable" work.
Of course, paradoxically, this could serve to increase the salaraies of those still willing to go into finance. As Adam Smith pointed out in Wealth of Nations:
[T]he wages of labour vary with... the honourableness or dishonourableness of the employment.... Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to show by and by. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.
Question to readers: Will the social stigma against Big Finance persist or fade as the economy bounces back?
In re. to Anonymous10, it might help if you were on topic in place of randomly inserting quotes.
As for the question, we shouldn't expect banks to go the way of tobacco. With tobacco it's easier to see damage done, with banks it's a highly confusing matter of money and law that even well educated citizens find difficult to understand. For the moment too much money from them is a bad thing for candidates, but it will only be a few years before the system reverts to it's pre-recession ways.
What's interesting about this is the rise of public unions in agitating and whipping up this frenzy. You have SEIU members protesting at the homes of bank employees, directed their by public law enforcement officers, and spouting a more extreme version of the government's anti-finance rhetoric. This raises the obvious question as to whether these public union agitators are now de facto arms of the state. Similarly (but also not), you have public sector unions rioting in Greece, and burning bank employees to death. It's an interesting phenomenon to unravel, especially as public sector employees have been the least impacted by this economic downturn. have received huge amounts of government largesse under Obama, yet are still facing gaping holes in their underfunded pensions.
I think the term of the outrage will be largely dependent on the economy, which will affect both perception and government finances, which are on a disastrous course; and this outrage will be nothing if this downturn lasts for a long time, if the government decides it needs to come for your 401K.
Answer : Probably not for long
The big difference between Big Tobacco and Wall Street is that the profits of Big Tobacco are seen as only benefiting those firms at the expense of our addictions, while the profits of Wall Street somehow trickle down to the "rest of us." There's probably some truth to it, and while times are good, most people aren't likely to cause a stir as long as the party is going on.
However, the current downturn has exposed some very dubious and self-serving practices to the public consciousness. Were the historical pattern of American short-sightedness not a firmly established modus operandi, I would be more optimistic of long-term corrective measures being taken in regards to transparency and whatever regulation should apply to Wall Street.
Yet, and despite crystal clear evidence of poor judgement at best and outright gross self-serving or parasitic behavior at worst by the proverbial fat cats, there is already public sentiment siding towards the principles of free market (which too often translates to a free-for-all financial land grab, actually) and erring on the side of laissez faire rather than actual good governance (lest America in any minimal way, heaven forbid, hint at the dreaded socialist tendencies).
Not sure where protective regulation that might legitimately serve the interests of Main Street over the interests of Wall Street came to be defined as "too much government", but I suspect the outrage will continue to ebb and much sooner than it should, and the culture of fiscal laxness and widespread lack of interest as long as everyone's day-to-day isn't obviously affected will be the rule of the day.
After all, everyone loves a party - and the exclusive clubs comprised of board members and lobbyists are more focused and determined than the usual murmurs and shrugs of the hoi polloi, eh ?
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.
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