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The Rhyme of History: Wall Street Edition

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Wall Street bankers dislike President Obama. A lot.

Or so says Brad DeLong.

Wall Street bankers' money is massively important in politics, but their votes are pretty inconsequential. Still, instead of getting the 40 percent of Wall Street votes that he got against McCain, President Obama is now only getting ten percent against Romney, a possible leading indicator of campaign contributions this fall.

The unspoken "standard bargain" between Wall Street banks and Democrats is not holding, DeLong concludes. Here's the bargain:

We will try to tax you (and, given the power of your lobbying operation in Congress, probably fail to do so), but we will give you competent economic management in striking contrast to that offered by the ideologically-blinded wingnuts who are the Republicans.

... [W]hen Wall Street has had a sense of its own long-run interests, it has taken the Democrats up on it. And it has been happy.

But not this time.

DeLong offers various explanations. Stock prices are way, way up from where they were when President Obama took office. The price for the stock of the biggest banks, however, has not gotten anywhere near what it was before the financial crisis, and Wall Street bankers' bonuses before the crisis were usually in stock and options. Sure, it may be like a patient brought back from death's doorstep by heroic medical efforts complaining that the tracheotomy left an unsightly scar, but Wall Street bankers think they fully deserve to be as rich as they were five years ago, and they're not.

More DeLong: "And the Wall Street bankers think that Obama disses them. And the Wall Street bankers know that Obama wants to tax them."

Kevin Drum at Mother Jones offers two reasons Why Wall Street Hates Obama, which really is just one reason:

The stock market is up, corporate profits are up, and bonuses have rebounded. From a purely self-interested financial point of view, I don't think very many of them are really dissatisfied with the Obama/Geithner/Bernanke regime.

So what is it? My guess is two things. First -- and there's no point in pulling punches here -- they're a bunch of spoiled brats. Over the past three decades they've gotten accustomed to the kind of deference normally offered to grand viziers of the Sublime Porte, and they're simply enraged at the fact that Obama not only doesn't seem very impressed by their accomplishments, but even criticizes them every once in a while.

Drum's second reason is their hatred of regulation, which is not just about money. Regulation "wounds them far more" than taxes, which are "a pure money thing." Regulation, on the other hand, is

... a signal that they aren't to be trusted. It's a reminder that someone else can tell them what to do. It makes it harder to earn money from purely financial manipulation. Dodd-Frank and Basel III may, in the end, not be very stringent regulatory regimes, but they're still viewed as unfair punishment. And we all know how children react to punishment they view as unfair. They sulk.

That's also pretty bratty.

Mark Twain supposedly said that history does not repeat itself, but it does rhyme. I devoutly wish Obama administration policies would rhyme more with the New Deal, and rely less on the free verse of "nudging" the nation towards a broadly-shared prosperity. But the offense taken by Wall Street bankers to the mildest criticism is iambic pentameter.

Arthur M. Schlesinger wrote in The Coming of the New Deal that at the 1933 convention of the American Bankers Association, the bankers "declined to collaborate" in New Deal programs to invest in troubled banks. Even though the program "was designed to rescue them," they thought the program "implied the threat of government control of the banking system." The ABA president "haughtily dismissed attacks on banking." The "self-congratulatory deliberations" at the convention were interrupted by a "hectoring speech" by Jesse Jones, the head of President Roosevelt's Reconstruction Finance Corporation and himself a banker, telling the "resentful audience" to increase capital. Jones "observed grimly" that "half the banks represented in this jolly gathering were insolvent."

Roosevelt attributed the opposition to New Deal efforts to increase business lending to the "sullen state of mind" of "some members of the banking fraternity."

If the effort of the New Deal, Schlesinger wrote, to

... police the competitive economy... was hard enough for the average businessman to accept, it was hardest of all for the bankers. No business group was more proud and powerful than the bankers; none was more persuaded of its own rectitude; none more accustomed to respectful consultation by government officials. To be attacked as antisocial was bewildering; to be excluded from the formation of public policy was beyond endurance. When one remembered both the premium bankers put on inside information and the chumminess they had enjoyed with past Presidents and Secretaries of the Treasury, the new chill in Washington was the cruelest of punishments.

So how did Roosevelt fare in the face of the bratty opposition of Wall Street bankers? Pretty well.

Roosevelt was elected in 1932. In 1934, Democrats started with 60 seats, gained nine in the then 96-member Senate, leaving Republicans with just 25 seats (The Progressive Party and the Farmer-Labor Party, both to the left of most Democrats, each held one). In the House, Democrats held 313 seats and gained nine more, leaving Republicans with 103 (The Progressive Party held seven seats and the Farmer-Labor Party held two).

The 2010 election went less well for Democrats.

And in 1936, Roosevelt received 98.5 percent of electoral votes, losing only Maine's five electoral votes and Vermont's two. President Obama may well win a second term this year, but the election won't go that well.

We are, of course, a different nation now, and history will not repeat itself. But maybe the Obama campaign should consider how to make history rhyme.

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