Josh Green has a good article in the Atlantic Monthly about Sarah Palin’s tenure as governor of Alaska. Near the end, Green wonders what would have happened if, after the collapse of Lehman Brothers, Palin had led the anti-Wall Street charge:
What if history had written a different ending? What if she had tried to do for the nation what she did for Alaska? The possibility is tantalizing and not hard to imagine. The week after the Republican convention, Lehman Brothers collapsed, and the whole economy suddenly seemed poised to go down with it. Palin might have been the torchbearer of reform, a role that would have come naturally. Everything about her—the aggressiveness, the gift for articulating resentments, her record and even her old allies in Alaska—would once more have been channeled against a foe worth pursuing. Palin, not Obama, might ultimately have come to represent “Change We Can Believe In.” What had he done that could possibly compare with how she had faced down special interests in Alaska [i.e., the oil industry]?This would’ve been a sight to see — especially if McCain and Palin had won. I think I can say with a high degree of confidence that Wall Street would not have taken kindly to this. (And by “Wall Street,” I’m primarily referring to the big sell-side banks.)
Unlike the oil industry, which is used to the rough-and-tumble of partisan politics, Wall Street is generally unaccustomed to being broadly vilified by mainstream politicians (as the thin-skinned reactions to financial reform from the likes of Jamie Dimon can attest). Much of Wall Street’s self-image is tied up in the idea that they occupy a higher intellectual plane than everyone else — especially all those poli-sci majors and journalists down in DC.
Having that idea openly and vigorously attacked by any VP would be a huge blow to the Street’s ego, but if it had come from Vice President Palin, I think some heads would have literally exploded in lower Manhattan. Because Wall Street is famous not only for its culture of arrogance, but also for its culture of sexism. Having a proudly unsophisticated, female politician like Palin leading what would undoubtedly have been a ham-fisted, populist-driven effort at financial reform would have been too much for Wall Street to handle.
What’s more, Wall Street would not have known how to respond. Whereas the oil and tobacco industries are used to winning legislative battles by essentially paying off key politicians through campaign contributions, Wall Street, pre-Lehman Brothers, derived the vast majority of its vaunted political power from its ability to convincingly tell politicians and their staffers that “this is all very complicated, and you shouldn’t worry your pretty little heads about it.” (This is a very underappreciated point.) The Street was going to lose its ability to play that card regardless of who won the election, but it would’ve been worse if McCain and Palin had won, because Palin would almost certainly have taken that argument and used it against Wall Street — much in the same way that she turns the tables on the “lamestream media” when they condescend to her. And since Wall Street is practically a market-maker in condescension, the condescension directed at Palin would have reached epic proportions.
Of course, if McCain and Palin had actually won the election, there’s a 0% chance that Palin would’ve been allowed to lead any sort of anti-Wall Street charge. Treasury Secretary Phil Gramm — a hall-of-fame Wall Street sucker — would never have allowed it.
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10 comments:
For Wall Street bankers to base a large ego on the idea that they "occupy a higher intellectual plane" is completely unwarranted. In that those on Wall Street have jobs today thanks only to the bailout generously provided by those "poli-sci majors" clustered in Washington, it's obvious that the bankers are looking through a very distorted looking glass.
The intellectual capital of Wall Street collapsed our economy, trashed (and bet against) the US housing sector and absorbed trillions of federal monies in the bailout. The continued failure of our financial sector to act without federal subsidies and support remains a massive drain on the recovery.
Their intellectual failures are matched in scale only by the gargantuan size of their greed.
Having the genius to bet against the American Dream is nothing to be proud of, quite frankly.
It was more the genious of betting against people who were some how given mortgages for no reason, on a house that was worth may more than they could afford.
To classify the collapse of 2008 only as "wall street" greed is just naive. Wall street was certainly filled with its fair share of greed, but no more or no less than the american spending more than their paychecks every month on cars, homes, iWhatevers.
Also, the "bailout" was a helluva profetable investment that the government was making. If it wasn't for the mainstreeters forcing wall streets hand to pay it back the government had massive potential of money making.
Each bank that had a tarp loan was paying lets say 5%... the treasury dept probably funded this with a 5-7 treasury note (assuming they "match funded") at 2-3.5%. So at a min, they were porfiting 1.5% off the top, so ever 100bn lent to banks they were making a relatively risk free rate of 1.5bn... not so bad.
Lastly, investment in all the big wall street banks (incl AIG) will prove to be wildly profitable, will Fannie (meant to serve the public and run by those poly sci majors), GM, and all the mainstreet banks are what is going to cost the tax payers
MSM, you do realise that the banks nearly collapsed exactly because they DID NOT bet against the housing sector?
Danny
To Peter, the US can never again afford the "profitability" that comes with investing tax dollars from bailing out a crippled, corrupt and failed financial sector. The high unemployment, collapse of hundreds of smaller banks, consolidation of the larger banks (now all "bank holding companies"), and precipitous crash of the economy have cut so severely into that "profit" as to make it a loss all around. It is ignorant and excessively short sighted to claim the bailout of our financial sector to be a "profitable" venture.
To Anonymous, you must have missed EOC's post "On Goldman & CDOs" (http://bit.ly/keTwXw) where he states that our leading "bank holding company" (Goldman Sachs) "wasn't necessarily placing an independent bet against the synthetic CDO market; rather, it was using synthetic CDOs to bet against the housing market. "
That is a remarkably disreputable way to make a buck. Perhaps legal, yes. But what a waste of the nation's intellectual capital!
Execs whose companies survive only thanks to a federal bailout are incompetent, not brilliant. Sadly, those "big swinging dicks" on Wall Street who are paid astronomical fees for "risk management" skills have shown they are most skilled at becoming the titans of welfare, not masters of the universe.
That such highly paid, highly trained, self-described brilliance can operate at such a level of failure is a tremendous loss for our country.
If I lend you at 5% and it costs me 4% where is my math going wrong?
Who's being naive now, Kay?
The unemployment was already heading down the drain and stopping the wall street collapse at a profit none the less was a smart idea (which is why BOTH administrations pursued it)
As far as the smaller banks (as with wall street) well perhaps their lending practices will change.
No longer will the availability of mortgages, credit cards, student loans etc be so easy to obtain. you seemed to conveniently avoid my comment about the greed on main street, thus giving you the ability to solely focus on wall street greed
Really entertaining. One of your best posts.
You've got to be kidding. Palin thinks that the only thing wrong with Wall Street is too much government. Any charges led by her would have been at regulatory agencies.
Really liked this post. Think it would have been a hard blow for Wall St if McCain and Palin would have won. Cannot even imagine what the US would have looked like today.
just wonderin'. . . . I'd read the Atlantic Monthly article, but then shortly after that saw news articles about gas pipelines in AK being a dead issue--both Exxon/BP project and AK project--due to low natural gas prices. Further, newspaper said this was know back in 2009 and was not a matter of if, but when. So--did Palin bail so she'd be over the horizon when reality came home?
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