TIMOTHY NOAH DECEMBER 8, 2011
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Jon Corzine's testimony before the House agriculture committee may mark the definitive end to the Democratic party's love affair with Wall Street.
Once upon a time, Wall Street bankers were Republicans. Not terribly ideological, they preferred whenever possible a minimum of taxation, regulation, and government in general, but they didn't make a fetish of it. As the GOP moved right starting in the mid-1960s the east coast Republican establishment began to crumble, and by the late 1980s it was mostly gone. These silk stocking conservatives had been driven out of the Republican party by a social agenda that frightened them, a budget deficit that threatened their livelihoods, and a base that increasingly viewed moderates as RINOs ("Republicans In Name Only").
By the early 1990s Wall Street was ready to go Democratic. In his new book, Back To Work, former President Bill Clinton writes,
"For every person on Wall Street who resembles the character Michael Douglas played in the Wall Street movies, there are many others who give lots of money every year to increase educational and economic opportunities for poor kids and inner-city entrepreneurs.
"Most of these people are grateful for their success and know that because of current economic circumstances, they're in the best position to contribute to solving our long-term debt problem and to making the investments necessary to restore our economic vitality. Many of them supported me when I raised their taxes in 1993, because I didn't attack them for their success. I simply asked them, as the primary beneficiaries of the 1980s growth and tax cuts, to help us balance our budget and invest in our future by creating more jobs and higher incomes for other people."
In crafting his first budget bill, Clinton was mindful of the bond market to such a degree that James Carville famously complained, "I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 basball hitter. But now I would like to come back as the bond market. You can intimidate everybody."
The Wall Street-Democratic Party love affair came out of the shadows and into the sunlight when Robert Rubin, former co-chairman of Goldman Sachs, became Treasury secretary. The economy was booming, the budget deficit was disappearing, and all was right with the world. The romance deepened through most of the aughts, so much so that in 2010 Rich Lowry of National Review complained, "the Democratic majority was bought and paid for by Wall Street and corporate money." In 2008 the finance sector actually gave more to the Democrats than to the Republicans, something that hadn't happened since 1990.
It all started to come apart in the late aughts as Democrats realized that Rubin's distaste for financial regulation (and that of his deputy and successor, Larry Summers, which was more pronounced) had contributed to the 2008 financial meltdown, in part because Rubin and Summers had outmaneuvered Brooksley Born, chairman of the Commodity Futures Trading Commission, when she wanted to regulate derivatives. Summers (who wasn't from Wall Street but was a Rubin acolyte) became director of the National Economic Council during President Barack Obama's first two years in office and the economy floundered. That deepened the alienation between Democrats and Wall Street.
Passage of the Dodd-Frank financial reform law drove the lovebirds further apart as Wall Street enlisted Republican goons first to weaken the bill (and succeeded in many instances) and then to neuter it by pressuring federal agencies to write regulations that created as little accountability as possible.
Protesters occupied Wall Street.
President Obama called bankers "fat cats."
Leon Cooperman, a Goldman Sachs veteran who now runs a hedge fund, circulated a whiny letter complaining about Obama's "divisive, polarizing tone" that went viral.
Sen. Chuck Schumer (D., N.Y.), a reliable Wall Street champion for years, voted for Dodd-Frank, and just last week Schumer announced that income inequality will be the Democrats' central issue for 2012.
And now Jon Corzine, a former Goldman Sachs CEO, Democratic senator, and Democratic governor, is testifying before the House Agriculture committee about the collapse of MF Global and the disappearance of $1.2 billion in customer funds. The House is Republican, of course, but committee Democrats and Republicans alike are asking, in various ways, "How the hell can you not know where the money went?"
The love affair is over.
17 comments
"The love affair is over." Good.
- Fishpeddler
December 8, 2011 at 5:02pm
What da peddler sed.
- tmmats
December 8, 2011 at 5:10pm
Don't make too much of this latest episode with Corzine; he only confirms what many of us have believed for a long time: the wizards of Wall Street are't smart, they are today's Willie Suttons. Sutton, when asked why he robbed banks, responded, "because that's where the money is". Of course, today the money isn't in the banks, it's on Wall Street.
- rayward
December 8, 2011 at 5:21pm
Not that this means anything. Many individuals in DC will still gladly kowtow to the 1% and their mega-millions of dollars with all kinds of special perks and laws that favor them and their money over the general welfare of the union.
- GSpinks
December 8, 2011 at 5:38pm
Wait a minute, the affair isn't over. BHO is hauling in more money from Wall Street than his Republican opponents are. He has raised more money from Bain Capital, Mitt Romney;'s former firm, than Romney himself has.
- liberalref
December 8, 2011 at 6:06pm
I'll also second the peddler. Gspinks: movements develop slowly. This rift is a necessary step in any future rebalancing of power in America against the giants of finance. Not saying it will happen--it's not a sufficient condition--but we can certainly hope.
- Curran1
December 8, 2011 at 6:16pm
Lib, what matters is not how much money was raised, but Obama's actions. If his actions follow his recent words, they're headed in the right direction.
- Curran1
December 8, 2011 at 6:17pm
I'd like to believe this were true, but like liberalref, I'm not holding my breath. If it were, the Democratic party, and most importantly, the country would be much better off. But the story of Dodd-Frank is much more complicated than Noah portrays it here. Sure, Democrats voted for it -- but is this a true sign of a changed attitude toward Wall Street? That remains to be seen. Let's see how toothless the Volcker rule is rendered, and whether any real effort is made to limit the size of mega-banks through stronger capital requirements or a tax on size (let's not even mention breaking them up altogether, God forbid). And then there's the foreclosure crisis, which the Obama administration continues to drag their feet on. I think its a much more complicated--and maybe more depressing--picture than Noah lets on.
- josh_y
December 8, 2011 at 11:35pm
libref, Wall Street donations to Obama only mean one thing: that it does not care a whit who is in the White House, only that they are not stark raving lunatics, which destablizes the markets. So far, they know Romney is looking hopeless and the rest are nutters. And so the checks go mindlessly out, like paying the security guards or paying for new computers. Obama-Shmobama, they don't care.
- WandreyCer
December 9, 2011 at 9:07am
I enjoyed your tepid and shallow acknowledgement there is indeed trouble in paradise between the Democrats and the suits stuffed with money on Wall Street. But the scandal surrounding Jon Corzine and MF Global points out how ideologically, politically and even morally the Democratic Party has become near bankrupt and how it is nearly indistinguishable from the Republic Party. There appears to be a one-party system in this country: The Green Party with two wings, Democratic and Republicans. And they adopted the color green not because they are concerned environmentalists. This scandal is far, far beyond the end of the love affair between Wall Street and Democrats. It reminds me of affairs in seedy motels with cockroaches scurrying across the walls, dirty bed linen stained with body fluids and empty liquor bottles around the bed. How can Corzine just misplace inadvertently up to $1.2 billion? Does he really expect anyone to believe his bullshit? He could be the poster boy for all that is unsavory with the Democratic Party and the disillusionment citizens feel about both parties. The OWS movement is only the tip of the iceberg. The average American citizen knows he has been fucked by the fickle finger of fate in this Great Recession, which really seems to him or her to look more and more like another Great Depression. President Obama called the denizens of Wall Street "fat cats." I am so underwhelmed. He better take off the gloves and get medieval on their asses, despite the hollow opinion of civic duty former President Bill Clinton has of the good, good citizens on Wall Street. As he used to say," Bubba, that dog don't hunt." Sp please, Noah, no more press releases about the basically good nature of the suits on Wall Street. They have enough money to hire their own PR representatives to write this kind of drivel.
- rewiredhogdog
December 9, 2011 at 5:29pm
Reluctantly, I'm with liberalfer aqnd others who share his skepticism. Obama always gives great speeches, and how now has turned his rhetorical wrath on Wall Street...though to a good extent, still only implicitly. But good speeches are only that. Curan, I also agree with you that Obama's actions actions are what count. But we don't have to wait to see his actions in action. Geithner stays on as Treasury Sec, despite his being the in thrall of Wall Street and the government official arguably most responsible for Obama's economic and financial reform shortcomings. The DOJ and SEC have been much too tame about going after Wall Street and pressing for settlements with it. And the campaign contributions keep pouring in from the Street, with all the influence that comes with them.
- Thunderroad
December 9, 2011 at 7:18pm
apparently the folks at Third Way haven't got the memo. They are still very much in love with Wall Street.
- morwin
December 9, 2011 at 7:40pm
"Can't buy me love."
- skahn
December 10, 2011 at 12:00am
Meh. In 10 years, how many people outside the world of finance will be able to afford to have a meaningful impact on the electoral process? Hard to picture one of the two political parties closing the door on what will almost certainly become an even more dominant part of the American economy in the years to come. Harder to picture that sector relegating itself to rooting for only one of two teams - there will always be bankers looking to buy their way to regulatory capture and corresponding arbitrage.
- misterpibb
December 10, 2011 at 12:45pm
RewiredHog, post more please. Curran writes: " If his actions follow his recent words, they're headed in the right direction." And what have the last 3 years been? Wall street, in case you haven't noticed, is making record profits. And paying record bonuses. Even higher than when Bush was in office. We've seen with Solendra and others that huge chunks of money were given to high-level "friends." The stimulus was equally rife with paybacks primarily to unionized employees, with very little benefit ($15/week) for the average family. We've seen Obama raise countless boogeymen, including fat cats, globalization, tsunamis, oil spills. These are nothing but excuses for his impotent response. The man has railed on about the Bush tax cuts for years. And at the first chance to strike them down, Obama and the dems did not. Even when they had congress in the bag. Poverty is at an all time high. Unemployment, especially those without jobs that have quit looking, is at historic highs. What have the last 3 years been? What actions are you judging him over that period? You act like the man just stepped into office.
- seattleeng
December 11, 2011 at 2:02pm
Seattle, since Obama never had "congress in the bag", can we cut it with the claim? Unless by "in the bag" you count not-quite-a-super-majority (58) as "in the bag". Independents who happen to caucus with Democrats are not Democrats (as their voting record demonstrates pretty clearly). Additionally, I'd note that I'm more than happy that GDP went from almost depression levels to ~+6% IRRC, and that monthly job numbers were back inline with pre-crisis levels (~150k) due to the emergency measures Bush and then Obama implemented. In less than a year no less. So, numbers in the senate aside, I'll give him a pass for working on more important things, and then moving to deal with the irresponsible Bush tax cuts when the time came.
- Nari224
December 12, 2011 at 1:49pm
Search on "Scott Brown" and supermajority and note how many articles mentioned the end of the dem supermajority. CBS news. ABC news. Denver Post. Even articles that want to split hairs admit there was super majority (see the 539 refugees blog in the search above and quoted below). No matter how you slice it, there was a super majority. We can debate that it wasn't in place long enough to be useful. But before that, you must admit there was a supermajority. "Depending upon which metric is used, Democrats had a super majority for roughly six months which includes the seven weeks between Franken’s swearing-in on July 8 to Ted Kennedy’s death on August 25 and the four months and nine days between Paul Kirk’s swearing-in on September 25, 2009 to his replacement by Scott Brown on February 4, 2010. This was just barely enough time to pass the biggest and most difficult health care legislation in generations; an event that would likely never have happened under any other circumstances. This also happened under the onslaught of every procedural obstruction the Republicans could put in its path."
- seattleeng
December 12, 2011 at 7:53pm