Wednesday, March 24, 2010

Why Does Main Street Hate Wall Street?

In a shocking development, a Bloomberg National Poll reveals that most Americans say they "don't like Wall Street, banks or insurance companies and favor letting the government punish bankers who helped cause the worst financial crisis since the Great Depression." Everyone knows that polls can be skewed, so maybe this is just some sort of error. Perhaps the questions were phrased like this:

Poller: Do you hate Wall Street?
Pollee Uh, I don't know. Some of my good friends work for banks.
Poller: Do you hate whoever caused the worst financial crisis since the Great Depression?
Pollee: Definitely!
Poller: Do you think that whoever caused the worst financial crisis since the Great Depression should be punished?
Pollee: Hell Yeah!
Poller: Thank you for responding to this poll. Have a nice day!

Paradoxically, despite the fact that Americans hate Wall Street and think those cads should be punished, nearly seven out of ten people surveyed supported using current bank regulators for consumer protection rather than introducing a new federal agency. Because keeping the same regulators who allowed banks to lend millions of dollars to people who couldn't afford a shoebox, then leverage themselves to the hilt, then bankrupt themselves, then allow them to go crying to the Fed for zero percent financing, then plead with the Treasury for capital injections, and then use the capital injections to pay bonuses to employees, is the best choice for sound future regulation. Bloomberg quotes a lawyer specializing in banking supervision with the following: "People are generally satisfied with the way consumer protection has worked with banks." I'm sure the people who bought a house with a zero down negative am mortgage, and have been living in that house in default for the past year, arguing with their lender over their HAMP loan mod are very satisfied. The rest of us, maybe not so much.

The reality is that Main Street is still suffering, while Wall Street thrives. Unemployment is still very high. Home values are stagnant, if not still declining. Credit continues to contract. Meanwhile, the stock market has ripped 73% off the lows, bond spreads are back to pre-crisis levels, and bankers are busy counting their bonuses, albeit in a somewhat more restricted and stock-like form. Furthermore, headlines about JP Morgan, as well as other banks and homebuilders getting huge tax refunds, don't help ease the ire. This is the kind of crap that gets tacked on to $800 billion stimulus bills that should make Americans hate stimulus packages. How does allowing the homebuilders to carry back losses five years instead of two, giving them huge tax refunds help stimulate the economy? It isn't making more people people buy new homes, that's for sure. If you checked this morning's economic headlines, new home sales fell to record lows.

In any event, the growing divide between the two Streets should continue until the economy improves and everyone starts having fun flipping houses again and forgets that they were mad. Or the market collapses and Wall Street crumbles again and politicians no longer have the political or actual capital to bail them out. Then everyone can be miserable together.

No comments: