Wall Street Wants Status Quo; Main Street Wants Change

Posted on March 22, 2009


Who can say where this economic crisis, including the near collapse of the banking system, will end, or how long it will last?

Remember that a year ago, most of the highest government and business leaders had full faith and confidence in the global economy, the markets, and the over-leveraged banks. Most of our government and business leaders, Timothy Geithner et al., are stunned by the breadth and depth of the economic collapse. They didn’t foresee it, and they said it could not happen. They defended or made excuses for the market machinations and business practices, such as multi-million salaries and bonuses for CEOs, which they now disingenuously condemn. They benefited from business as usual, with all its unethical practices and imprudent risks.

And so it seems to me that most of those in Congress, on Wall Street, and in the Treasury Department, are still stunned and struggling to understand what has happened and what to do. They don’t know if the flawed emergency actions they have taken so far will work. “Uncertainty” is perhaps the only word most of our leaders can agree on.

The emotions of the body politic fluctuate from day to day or week to week, from fear to panic to hope to anger. What will the governing emotion be next week? Does government by reaction to public outrage work?

Most of the high government and business leaders, except for the few who will go to jail, such as Bernie Madoff, are going to continue living in privilege and comfort, even if their paper wealth is halved. For practical purposes, it makes no difference in your lifestyle whether your net worth is $200 million or $100 million.

But all over America, everyday people are losing their comfort and security. If you lose your house or your job, it makes a painful difference in your standard of living. No wonder they are fearful and angry.

The rock-bottom economic interests of the privileged leaders and the everyday people were aligned, as long as prosperity was widely distributed, with a safety net for the poor.

If widespread prosperity is no longer possible, then the economic interests will diverge, have already diverged.

Wall Street and business leaders want to salvage what’s left, to continue business as usual, for instance their bonuses. They can always retreat to their country estates and gated communities, with their private security.

Everyday people want to change a system that they see as corrupt and unfair, and run by self-serving incompetents.

Three examples of the divergence in economic interests:

1) Finance and Banking. Wall Street wants federal bailout money with no strings attached, to save the existing structure and its bonuses. Everyday people want access to credit, and no bonuses for AIG.

2) Free Trade: International corporations want freedom to send their money and jobs overseas, in search of higher profits and worldwide economic growth. Everyday people want good jobs in the U.S., are unsure of the benefits of free trade, and are open to protectionism.

3) Health care. Leaders in government and the health care and insurance industries would like to salvage the status quo. They would like to jury-rig the inefficient private health insurance system to provide health coverage for nearly everybody, and preserve profits for the insurance companies.

Everyday people just want reliable health care. In the new atmosphere of fear, they want certainty. Everyday people are more likely to want change that will be simple and fair, such as a single-payer health system, everybody in and nobody out.

Government leaders are caught in the middle. They benefit from the system through political contributions and revolving doors, but they need the votes of everyday people to remain in office.

We have elected President Barack Obama, who is open to change, and that is a good start. Right now the government seems dysfunctional because President Obama appears to have surrounded himself with advisers who have a vested interest in the status quo; and because Congress is divided and buffeted by public opinion.

What next?

The Obama administration may coalesce and come up with viable economic solutions. Or not.

A working majority may coalesce in Congress to enact viable solutions. Or not.

Business and financial leaders may cooperate with government recovery efforts. Or not.

You can see why there’s a lot of uncertainty. If the answers continue to be “Not,” then no one knows what may happen.

You can see why there’s a lot of fear. No one knows the bottom.

— Bernie Hayden