Wall Street’s Lifeboat Ethics

Ruth: Will the lifeboats be seated according to class? I hope they aren't too crowded.

Rose: Oh mother, shut up! Don't you understand? The water is freezing and there aren't enough boats. Not enough by half. Half the people on this ship are going to die.

Cal Hockley: Not the better half.

Rose calls Hockley an “unimaginable bastard.” Our twenty-first century masters of the universe have done the Titanic [1] bastards one better. As the U.S. economy lists, Wall Street brokers, bankers and speculators of the second Gilded Age expect those of us in steerage to buy them lifeboats – a $700 billion bailout. The same Washington voices that warned us of mustard gas and mushroom clouds insist we must bail out Wall Street to avert our own demise. The financiers will row back and pick us up once the ship goes down.

We have seen that movie.

An exchange last week between Larry Kudlow (CNBC, National Review; formerly of the Reagan administration, Freddie Mac and Bear Stearns) and Vermont Sen. Bernie Sanders was a window into Wall Street’s bankrupt lifeboat ethics:

Sanders mocks Kudlow as a socialist for supporting the disaster capitalist [2] bailout of Wall Street. Ordinarily, government expenditures designed to help Main Street educate children or provide health care for families are non-starters for Kudlow [3] and his fellows. They cost too much. They present a moral hazard [4] and tilt America towards socialism, something fiscal conservatives oppose on principle. Benefits for Main Street are irrelevant. National health care? "Oh, no!" Sanders mimics.

Yet Kudlow argues for government intervention in this case: "Every twenty or thirty or fifty years, I'm okay with it." Kudlow argues [1:59] that a taxpayer-funded bailout of Wall Street moguls will "first and foremost help Main Street, middle-class people." But why worry about them now? Why support government intervention after opposing it so adamantly on principle?

"Wall Street went bust!” protests Kudlow [3:58]. “I mean, look what happened. Bear Stearns went under. Lehman Brothers went under. Merrill had to sell."

See, his friends are in peril.

Do you face financial hardships? You’re on your own in the ownership society. But when Bear Stearns and Lehman dig themselves into a hole, it’s hair-on-fire time. Working families “desperately need credit,” that is, future Wall Street profits and bonuses are at risk. Government cannot intervene fast enough. The Bush administration did not blink (blinking telegraphs weakness) before demanding a $700 billion bailout package with no plan, no reforms and no strings. Their response time was record-setting. The better half might go under.

After New Orleans went under (water) and after hundreds drowned, conservative pundits and bloggers argued that taxpayers had no responsibility for bailing out lesser-half survivors who "irresponsibly" live and work in a town established below sea level in the eighteenth century. President Bush arrived late. He promised help. Three years later, New Orleans is still waiting.

Wall Street can wait a little longer. Investment houses don’t bleed. This is not a life-and-death matter for artificial lifeforms conceived in law [5], born on paper, and engineered to relentlessly pursue profit. The bottom line is, as actor Michael Biehn said of “The Terminator,” that’s what a corporation does. That’s all it does.

The bailout proposal being drafted in Washington may pass this week. The details are still being hammered out, and the draft was released [6] as this was written.

Ironically, this crisis and the public outrage over the bailout has united Americans across the political spectrum in common cause: they don’t want it. What Beltway mavens do not yet grasp is that public outrage over the Wall Street bailout goes deeper than technical issues of oversight, reform, “golden parachutes,” who pays, the $700 billion, or if the damned plan will even work. We, the American people, watched in horror as Washington sat on its hands while New Orleans drowned. We don’t want the bailout, if for no other reason, because of the startling speed with which Washington insiders leapt to Wall Street’s rescue, tripping over each other to sacrifice the American taxpayer on the altar of corporate greed. It lays bare the degree to which leaders of both major parties are bought and paid for by the deep-pocketed suits who fund their campaigns and insist upon maintaining the status quo – their status quo – at all costs, including our democracy.

With comments like Kudlow’s and the inevitability of the bailout plan’s passage in Congress, that has never been more clear. Voters are mad as hell, and they’re not going to take this anymore.

We have seen that movie too.