To discuss the elite back-lash to the populist back-lash, Mr. Zakaria had on his show three representatives of the much-neglected elite opinion. I know it's usually difficult for the wealthy and powerful to have a voice in our society, but fortunately they were able to grab a few minutes to press their case before the Sunday afternoon political interview and talk show audience. It's a time when the godly are safely tucked into their pews, the ungodly are sleeping off their Saturday night bender, and the elite are having brunch with their multi-millionaire in-laws, as they are forced to do every Sunday of their lives instead of spending the day with their mistresses, as the less elite are free to do. But they are able to catch a few minutes of CNN; indeed, they are forced to, since CNBC has a distressing week-end habit of airing shows like "American Greed," and who wants to see one's self labeled a hater before one's Belgian-waffle-and-Denver omelet-eating peers? Instead, you turn to Zakaria, who has put on a former partner at Goldman Sachs who wrote an article titled "Greed is Good," a Merrill Lynch analyst "forced out" after fraud allegations, and McArdle. Which perfectly situates her in her proper position; between venality and avarice.
The guests all agree that good, well-paid employees are essential to revive AIG, and therefore AIG needs to pay good bonuses to its good employees. Zakaria does not challenge the notion that AIG can and should be rescued or its employees are good, and ignores straw-men such as the idea that the employees will be paid nothing otherwise or AIG employees are being "thrown away." It's fertile ground for Megan's opinion.
The outrage may be completely counterproductive. But on the other hand, it's totally valid. They are getting taxpayer money, and it is totally valid to feel like I shouldn't be paying some guy who got me into trouble, forced me to bail his company out, give him another $3 million.
On Henry [Blodget]'s site, yesterday there was someone who posted a letter from an investment banker who pointed out that these guys hate their jobs. It's not a fun time to be in that position. And so, you may really need to pay the money to retain them.
Maybe the moral outrage is worth -- expressing our moral outrage is worth the price that we're going to pay if AIG gets into trouble. And that's a political decision. It's not really an economic decision.
Populist outrage at the fact that taxpayers must give millions to millionaires who helped ruin the economy will hurt us, you see. It's our money, and if we keep the men who ruined AIG from saving AIG, boy will we look stupid! But hey, it's our fault for letting politics interfere with the smooth running of the free market. Interfere with the men who know what they're doing and something really, really bad could happen. Of course Democrats are just pushing their Democrat Big Government political agenda here; smart people would leave the free market alone because it just corrects itself. Just as soon as the government signs the bailout checks, they should leave Wall Street alone to let the markets fix themselves without any damaging government interference whatsoever.
Zakaria next asks McArdle about regulation. Will the Democrats take advantage of this situation (that we just happened to find ourselves in through no fault of Wall Street) by demanding regulation, purely for political and ideological purposes?
Oh, absolutely. When the election was finally decided, my Twitter feed was filled with friends who were liberals, and Obama fans, going "It's 1932. It's 1932!"
You know, they're ready to sit down and really get in there and start, you know, playing with all the levers and the pulleys. They want to do radical reform. There's a huge sentiment.
I mean, there's also a sentiment out on the street, on Main Street, that we've been taken for a ride, that people on Wall Street have been making outrageous sums of money for what turns out to have been not merely worthless, but actively harmful.
Now, obviously, that's completely exaggerated, in my opinion, and Wall Street does a lot of good things. But -- although I probably won't make any friends for saying that here.
But, you know, it doesn't really matter at this point what the underlying economic reality is. At this point what matters is the politically reality.
It's odd that McArdle never mentioned the liberals rejoicing that it was 1932 again. That's the sort of thing that McArdle would mention. A lot. Did liberals really fill McArdle's twitter with cheers of "It's 1932!" to rejoice at a new era of regulation? Let's get into Marlo Thomas' time machine and find out.
Is it 1932?
I heard that a fair amount last night, and over the past few
This is faulty economic history. It is not 1932. It is 1929.
Outside of the economics profession, the FDR mythos is strong among
Democrats: Hoover did nothing, and then FDR came in with his magic Keynesianism,
and through the mighty power of massive government spending and a huge increase
in the social safety net, got America moving again.
know better. You can argue whether FDR, on net, helped a lot, helped a little,
or mildly hindered recovery. But you cannot argue that if FDR had gotten into
office on January 20th, 1930, America would have avoided most of the pain of the
next three years. The progression of the bank panics and industrial slowdown
throughout the next two years is well described, but not well understood. But
the problem was clearly not merely a lack of government activity, or fiscal
stimulus. Hoover was, contra popular myth, fairly active. It's just nothing he
did worked. Neither did most of the things FDR tried.
FDR did some
things right, don't get me wrong--and I think some of those really made a
difference, notably bank audits and the creation of the FDIC. But he also
benefitted tremendously from stepping in just as the banking system, and hence
the economy, were bottoming out. By the time of the second banking panic, the
system really didn't have much of anywhere to go but up.
Obama has the
benefit of better economic theory--but not nearly as much better as we thought
six months ago. There is no economic consensus--or even a revolutionary school
like the Keynesians--with a coherent program for getting us out of the crisis.
The happy, utterly wrong narrative of Democrats striding in and boldly reversing
Republican errors with stiff regulation, an expanded safety net, and massive
fiscal stimulus, is wrong when applied to FDR. It won't save Obama either.
If the crisis is as bad as some people fear, Obama will have no magic
bullet to fire at it. The very best he can hope for is a fairly successful
process of trial and error. To the electorate, that will look like bumbling as
Now, the worst may not happen; and even if it does, Bush,
not Obama, may get the blame. But Obama is not in nearly as strong a position as
FDR was in 1932.
Well, my goodness me. People did twitter about 1932, but it was in a different context: They were worried about recovery and felt Obama would be more like FDR than McCain, an indisputably correct assumption. Here McArdle states that Obama's recovery plan won't help, just like FDR's recover plan didn't help. Later McArdle is all for Wall Street bailout and against Main Street stimulus, which just proves how flexible she is regarding the free market and libertarianism.
McArdle twisted the truth to make it sound like those evil liberals just couldn't wait to slap regulations on Wall Street for no reason at all. Bad, bad liberals! They want to be radical and pull levers and push buttons. They'll mess with the economy and break it, and then where will sensible, important conservative businessmen be with a broken economy (through no fault of their own)? Why, it could be that liberal interference will keep the economy from recovering altogether! Which is also not the conservatives' fault; the free market always fixes itself so if the economy is too broken to recover it will be all the fault of Democrats, who are mean to Megan and want to drag down the rich because of their smelly hippie envy and hatred.
Obviously the idea that Wall Street has been naughty is exaggerated, and bankers are good, honest people who "do a lot of good things." McArdle believes in and trusts Wall Street and bankers, and is always willing to put in a good word for such an important, educated, accomplished, superior caste of Americans. For instance, she also supports them here, here, here, here, here, here, here, here, and here. And there's a lot more, but we are nearly done, for McArdle ends by repeating that ire at AIG is just politics, and not reality at all, and Zakaria takes us to commercial.
Gosh, we're lucky, that in our hour on need there's Megan McArdle to speak up for the rich and venal, who otherwise would be forced to experience a moment of unease while enjoying their billions.