09/15/2010 01:13 pm ET | Updated May 25, 2011

New York Election Destroys Bloomberg-ish Conventional Wisdom About Wall Street Politics

For the last few years, the conventional wisdom in American politics has been that despite Wall Street's destructive effect on the economy, the national Democratic Party cannot really crack down on Wall Street because it is allegedly hamstrung by the supposed inherent political constraints put on their large New York congressional delegation. The theory -- most honestly articulated by onetime New York Senate candidate Harold Ford, and embodied by the weekly pro-Wall Street declarations of Michael Bloomberg -- suggests that New York lawmakers cannot be pro-regulation because those lawmakers' constituents would punish them at the polls for juxtaposing themselves against the New York-based financial sector.

But as the Wall Street Journal reports this morning, that conventional wisdom was destroyed yesterday once and for all:

How Did Wall Street Vets Fare in Primaries? Not Well.

It wasn't a good day for Wall Street vets or watchdogs in the New York primary.

Reshma Saujani, a former lawyer for hedge fund Fortress Investments and white shoe law firm Davis Polk, lost the Democratic primary race for a Congressional seat representing Manhattan's Upper East Side.

Rick Lazio, a former lobbyist for J.P. Morgan Chase who was taunted by opponents for earning a $1.3 million bonus during the 2008 bailout, lost out in the Republican primary for governor...

Eric Dinallo (who also did a stint early this decade at Morgan Stanley) was trounced in the Democratic primary for Attorney General by Eric Schneiderman.

Couple this with Harold Ford being drubbed out of the Senate race and with Bloomberg's pathetically weak reelection numbers in 2009 and the truth is pretty simple: It's not that New York Democrats like Sen. Chuck Schumer are compelled by rank-and-file voters to protect Wall Street interests. It's that many of those New York Democrats have taken a huge amount of campaign cash from those interests and are choosing to protect them rhetorically, politically and legislatively.

This makes perfect sense when you go one inch beneath the inane conventional wisdom that says everyone in New York must love Wall Street simply because Wall Street happens to be located in New York. The fact is, New York -- both the city and the state -- is extraordinarily economically stratified. While the financial sector is certainly a part of the New York economy, so too are the very serious downsides of financialization.

The political media may try to make us mentally associate New York with Goldman Sachs' gleaming taxpayer-subsidized office tower, but for most regular New Yorkers, the state is in the midst of the same Wall Street-induced Great Recession as the rest of us - and that means foreclosures, the destruction of the manufacturing base, lower wages and a lack of credit for capital investment.

Considering that, these New York election results aren't surprising in the least. They are an affirmation that rank-and-file New Yorkers are as angry at corporate special interests as the rest of us. Let's hope this finally debunks the notion that the politics of New York automatically restricts the national Democratic Party from being as economically populist as it can be -- and needs to be. If the Democratic Party is, indeed, too afraid to take on corporate interests, that's not because of voters in New York (or elsewhere) -- it's because the Democratic Party is choosing its donors over the public.