The Right’s Hypocritical Crusade against Wall Street
I almost never agree with First Things on economic policy, but Robert T. Miller was right last week when he warned that “those on the political right need to make sure that the Republicans in Congress do not through ignorance or stupidity misunderstand conservative economic principles and so lead us into economic disaster.” Unfortunately, that’s exactly what Republicans in the House did today when they tanked the President’s $700 billion financial bail-out bill and sent the stock market plunging to its biggest one day loss ever.
They say timing is everything. In this case, the Republicans picked the worst possible time to start crusading against Wall Street greed—where have they been for the past thirty years? Everyone knows where—standing aside, in the name of the “free market,” as laws and regulations enacted after the Great Depression to restrict dangerous and unproductive speculation were peeled away for the sake of “deregulation” (thank you Ronald Reagan).
As a result, investment banks, hedge funds, private equity firms and other speculators, operating without any oversight, and looking for outsized profits for themselves and for investor clients not satisfied with merely average rates of return on their money, were able to invest trillions and trillions of dollars in ever more complex and opaque financial instruments, turning the credit markets into a monstrously high-risk, high-leverage, financial Casino. (See Ben Stein’s article on this.)
When the subprime mortgage market ran into problems last year, due to the end of the housing boom and other reasons having to do with fraud and usurious practices, it started a chain reaction that now threatens to bring the whole shaky structure crashing down (It’s important to realize that financial bets worth $62 trillion were made on $1 trillion worth of subprime mortgages. That’s what’s causing such huge problems. For the most detailed, definitive analysis of the crisis, see Charles Morris’ The Trillion Dollar Meltdown).
I said I agreed with First Things that the bail-out should go through. But I don’t agree with R.R. Reno’s analysis that “we’re all to blame” for the crisis because so many Americans happened to benefit from rising home values. That’s like saying the Sunnis were all as much to blame as Saddam Hussein for the Baathist tyranny because they held a privileged position in Iraq. Sure, Americans in the top 50% of the income scale profited from the booms of the last thirty years—the junk-bond and S&L-driven eighties, the internet bubble-induced expansion of the nineties, and the recent housing boom. The middle and upper-middle class played the game, and participated in the culture of greed. But they’ve had little choice in the matter; they didn’t make the rules. The rules were imposed from the top down, with the most obscene rewards going to the rule-makers on Wall Street.
As for the election, the pyrrhic Republican victory today in the house, along with Sarah Palin’s continuing cluelessness, and John McCain’s erratic leadership and inability to convince anyone that he’s ever been against the “fat cats,” has driven me away for good. In the end, the pro-life cause is hurt by association with such cranks. In dangerous times, there’s no substitute for character and judgment, and McCain/Palin are just too unstable and scary. Not surprisingly, I’m hearing the same sentiment tonight from some of my orthodox Catholic friends as well.