On Monday we began our first WonkFeud, in which our own Jim Tankersley and the Wall Street Journal's Ben Casselman went at each other over labor force participation. Now, it's Round 2. Catch up with Casselman's original article that started it all here, Jim's initial parry here, and Casselman's counter-jab here.
Why should rappers have all the great beefs? Here is the first in a new feature in which we air our disagreements with things we read elsewhere. In today's installment, Jim Tankersley takes issue with the Wall Street Journal's Ben Casselman over his piece today on labor force participation. Look for Casselman's retort at the Journal's Real Time Economics blog. Jay-Z has nothing on J-Tank. (Except millions of dollars and Beyonce.)
A growing number of states are making the case that President Obama's Wall Street reform is unconstitutional. Eight states have just signed onto a lawsuit claiming that broad swaths of Dodd-Frank are illegal, joining three states and three private groups.
Legal experts say the case against Dodd-Frank is premature, and much of it is unlikely to hold up in court. But some believe that at least one part of the lawsuit points to legitimate constitutional problems that could be raised in court further down the road.
Republicans may hate Dodd-Frank, deriding the law for imposing stifling regulations on Wall Street. But a growing number of conservatives are abandoning the call for straight-up repeal, instead pushing regulations of their own to fix the financial system. On Tuesday, Rep. John Campbell (R-Calif.) introduced a new bill that aims to prevent future bailouts by imposing new capital requirements and other rules on big banks.
I'm a daily reader of the American Action Forum's Daily Dish, which offers a conservative take on the morning's economic news. Wednesday morning's edition particularly caught my eye for the bold claim in the first paragraph:
Counter to what the likes of Paul Krugman has been saying, CNBC notes that "Wall Street is sending a sharp and unambiguous message to Washington: cut spending and solve the deficit problem now and don't do it with more revenue.
There's a provocative new op-ed Thursday in the Wall Street Journal from economists Donald Boudreaux and Mark Perry, who argue that the middle class isn't stagnating, even though middle-class incomes have flatlined for decades. Their basic point is that middle-class living standards keep going up and that middle-class consumers have "more buying power than ever before."
There aren't many things that James Gorman, the Australian born, swagger-filled chief executive of Morgan Stanley, and the sharpest critics of the banking industry can agree about. But here is a big one.
"There's way too much capacity and compensation is way too high," Gorman said in an interview with the Financial Times in October. "I'm sort of sympathetic to the shareholder view that the industry is still overpaid."
There are a mere 225 miles of road connecting the U.S. Capitol and Wall Street. To judge from the tone coming from the nation's political and financial capitals the last few days, however, it may as well be an ocean.
Over the past week, President Obama and House Republicans have made their initial offers on resolving the fiscal cliff—plans to prevent an austerity crisis of tax hikes and spending cuts from taking effect Jan. 1—and each side issued a deep-throated chortle at the other's offer. Much of this is the inevitable posturing that is a necessary prelude to true deal-making. But only four weeks before the austerity crisis sets in (and with a Christmas holiday wedged within that four weeks), it amounted to lost time and gave no sense that any real negotiating had begun.
Is it even possible to tally up the total impact of the financial crisis? Better Markets tried to give it a shot and puts the price tag at “no less than $12.8 trillion.”
Better Markets, a non-profit that’s pushing for stricter rules on Wall Street, explains its calculations in a new report: $7.6 trillion is the estimated actual GDP lost between 2008 and 2018—what the country’s output would have been had the financial meltdown not occurred, according to data from the Federal Reserve Bank in St. Louis and forecasts from the Congressional Budget Office.
Mitt Romney has vowed to repeal and replace Obama’s Wall Street reform law. But many vocal opponents of Dodd-Frank believe that’s highly unlikely — and suggest that incremental reforms to the law are the most they’d expect to happen, even in a Republican controlled Washington.
Wall Street firms have poured a huge amount of time and resources into lobbying regulators on Dodd-Frank, urging them to rule against implementing the new rules with a heavy hand. But despite their misgivings about some of the major laws, they’re also working off the general assumption that Dodd-Frank is here to stay, regardless of what happens in November. ”There seems to be a narrative that derivatives and proprietary trading are the riskiest. This is a solution in search of a problem. But the battle [over deciding the narrative] has been lost, to a significant degree,” said one financial services industry lobbyist.
For Dennis Kelleher, trying to calculate the final price tag of Wall Street reform is pure folly—partly because he thinks it’s simply impossible, and partly because he believes those demanding it have vested interests in using such costs to strike down reform.
“Many of the costs and benefits of financial regulation simply cannot be quantified,” Kelleher, head of advocacy group Better Markets, said in a speech on Monday at the Peterson Institute for International Economics. ”How do you quantify the human costs that all the economic wreckage has inflicted? Searching and not being able to find work for years…lost retirements, educations and dreams. How do you quantify that? You don’t.”
JPMorgan revealed Friday morning that its traders may have lied about the value of their positions to hide the losses incurred by its Chief Investment Office. The bank now estimates that the so-called “London Whale” trades dealt the bank a $5.8 billion loss in the year to date — nearly three times the amount the firm had originally estimated.
The limits of regulation are well known to Gary Gensler.
As a core member of President Bill Clinton’s Treasury Department, Gensler, with his colleagues, leapt to transform the financial markets through new legislation, in the wake of an Asian currency crisis that threatened the global financial system. Years later, they realized they had made some flawed assumptions.
Americans’ trust in banks has fallen to a record low, with only 21 percent saying they have “a great deal” or “quite a lot” of confidence in them. That discontent could spur some to action. A new survey from Javelin Strategy and Research found that 11 percent of customers say they’re likely or very likely to switch their primary bank over the next year.
After last summer’s debt-ceiling debacle, Wall Street is divided about whether the fiscal cliff could harm the economy. On the one hand, Barclays Capital surveyed its institutional investors, and they were overwhelmingly confident that Congress could reach a deal without adverse harm to the economy:
The idea, admits tax lawyer Lee Sheppard, would prompt bankers to “look at you balefully, like you just ran over their dog.”
But advocates for higher taxes on Wall Street trading hope the proposal gets a second hearing--particularly since JPMorgan’s messy loss has raised new questions about the risks that big banks are still taking. They argue that a tax on trading would not only raise needed revenue, but also help curb some of the speculative, risky activities that make the markets so volatile--preventing, perhaps, the next “London Whale.”
They call themselves the “Shadow Financial Regulatory Committee.” But that’s a bit of a misnomer: the “Shadow Deregulatory Committee” would probably be more accurate.
The group is part of the brain trust that the American Enterprise Institute has assembled to help push back against the growing consensus that deregulating Wall Street had caused the meltdown, using white papers and wonkspeak instead of political bombast. And they convened on Monday morning to present their latest: a defense of the Jumpstart Our Business Startups Act, which passed Congress last month and makes it easier for new companies to raise investment capital. But even at a small lunchtime gathering at AEI headquarters, their defense of deregulation raised the hackles of some onlookers.
At about 1 a.m. Tuesday morning, hundreds of New York City police officers raided Zuccotti Park. Police tore down tents and, according to witnesses, used tear gas, pepper spray, and at about 3 a.m., a sound cannon. Some of the protesters left immediately, quietly. Some of them joined together in the middle of the park, chanting, “Whose park? Our park!”
Police ultimately made 70 arrests and cleared the area. Their park.
In a statement released a few hours ago, Mayor Michael Bloomberg* explained the raid. “I have become increasingly concerned – as had the park’s owner, Brookfield Properties – that the occupation was coming to pose a health and fire safety hazard to the protestors and to the surrounding community. We have been in constant contact with Brookfield and yesterday they requested that the City assist it in enforcing the no sleeping and camping rules in the park. But make no mistake – the final decision to act was mine.”
Members of Occupy Wall Street are furious. Protests are being planned at various sites throughout the day. But the truth is, Bloomberg might have just done Occupy Wall Street a favor.
“Whatever the objectives of protesters involved in Occupy Wall Street, they have succeeded in engaging the country in a conversation about income inequality,” writes Dylan Byers at Ben Smith’s new and expanded blog. “A quick search of the news — including print articles, web stories and broadcast transcripts — via Nexis reveals a significant rise in the use of the term ‘income inequality,’ from less than 91 instances in the week before the occupation started to almost 500 instances last week.”
Here’s your “whoa” moment of the day: In a Friday research note, Jan Hatzius and Sven Jari Stehn begged the Federal Reserve to put its foot on the gas already and simply declare that they will do whatever is necessary to get growth back on track (read the whole document here). Who are Jan Hatzius and Sven Jari Stehn, you ask? They’re two of Goldman Sachs’s chief economists. They’re the guys who send economic analyses out to the firm’s paying clients. And they’ve just endorsed a policy that should thrill the 99 percent.
This helps to make the point, I think, that though the Occupy Wall Street folks are right that Wall Street has done a lot of damage to the economy and the top 1 percent have developed a curious ability to prosper while most Americans fall behind, in the long run, almost everyone’s interests are aligned here. Banks and corporations might be able to prosper in a bad economy for a couple of years, but they can’t do it for very long. Indeed, it seems like time might already be running out for Wall Street.
“Finally,” tweeted Ben Furnas after a weekend at the Occupy Wall Street protests, “a social movement that likes distribution tables.”
Whether you agree with their messages or not, there’s little doubt that Occupy Wall Street had the wonkiest signs of any protest movement in memory. Here are a few of our favorites:
Created with Admarket's flickrSLiDR.
If you’ve seen others, leave them in the comments, and I’ll add the best to the slideshow. And if you head to the underlying Flickr set, there are links back to the sources for all of the pictures.
A few days ago, the Huffington Post sent me a press alert saying that Mohammed el-Erian had written a blog post warning readers to “listen to Occupy Wall Street.” That caught my eye.
For those who don’t know el-Erian, he’s a co-CEO of PIMCO, one of the world’s largest — and wealthiest — bond trading operations, with more than $1 trillion under management. Despite being based in Southern California, PIMCO and its leaders are titans in finance. So I called el-Erian to ask him what exactly he saw in this movement that is, in large part, dedicated to combating his industry.
Ezra Klein: You’ve done quite well in finance. You have, presumably, a lot of friends in finance. But insofar as Occupy Wall Street has an agenda, it’s to shrink the power, size and compensation of the finance sector. So explain what in their message appeals to you.
Mohammed el-Erian: My reaction was colored by two views I’ve expressed already: One has to do with what has happened to finance. In the mid-2000s, the thinking about finance evolved to believing it was a standalone phase in capitalist progression. Society -- in particular the U.K. and U.S. -- bought into the notion that the path of development was agriculture to industry to services to finance. And that explains a lot in terms of people’s mindset. The name of the industry went from “the financial services” industry to “the finance industry.” It lost sight of the fact that it services the real economy. You cannot simply exchange paper.
A lot of the posts on ‘We Are the 99 Percent’ dwell on the problem of student loans. In fact, according to this textual analysis by Mike Konczal, student loans are the leading concern on the Web site. But “college graduates’ problems should be kept in perspective,” writes Josh Barro. “The unemployment rate for people with bachelor’s degrees or higher is 4.3 percent.” Here’s a graph:
College graduates have certainly had an easier time of it than, say, high school graduates. But simply looking at the unemployment numbers can understate the damage the recession has done to college graduates. After all, even the employed can suffer.
Some of the people camped out Zuccotti Park for the Occupy Wall Street protest want to End the Fed. Others want to tax Wall Street. One woman assured me that “very few” of the top one percent live in New York, or even in the United States. “They’re in gated communities all around the world,” she said. Someone else saw this as a cultural revolution. When I arrived, the crowd seemed almost entirely under-30. By the time I left, it was considerably less homogenous.
There is not, in other words, all that much you can say with confidence about what Occupy Wall Street is or isn’t. At the moment, it’s different things to different people. And, depending on your perspective, that may be the nascent movement’s biggest strength or its fatal weakness.
(On Monday, I asked Rich Yeselson for his thoughts on Occupy Wall Street. Yeselson, a research coordinator at Change to Win, is a skilled organizer and a thoughtful historian of social movements in America and Europe. On Tuesday, he sent over some notes, and I think they’re worth publishing in full. All opinions expressed here are his own. -- Ezra)
The Wall Street protests seem to be gathering strength and expanding beyond the geographic limits of downtown Manhattan. The media, too, is finally amplifying the story. Whether they will grow larger and sustain themselves beyond these initial street actions will depend upon four things: the work of skilled organizers; the success of those organizers in getting people, once these events end, to meet over and over and over again; whether or not the movement can promote public policy solutions that are organically linked to the quotidian lives of its supporters; and the ability of liberalism’s infrastructure of intellectuals, writers, artists and professionals to expend an enormous amount of their cultural capital in support of the movement.
Americans--infatuated with the next new thing, and proud to believe they are outside the constraints and burdens of history--love neophytes, gifted amateurs. We’re action-oriented and suspicious of elitist expertise, and we thrill to the idea that anybody with moxie can jump in and deliver a baby or land a 737. Right now, it appears that anti-hierarchical, relatively inexperienced people are “running” the Wall Street protest. And they are doing big demonstrations really well. So far, so good. Anger can beget action. And action itself can be a battering ram that knocks down the doors of history.