Wonkblog: Wall Street

The Volcker rule cites the Occupy Movement 284 times

The Volcker rule cites the Occupy Movement 284 times

The world hasn't heard much from Occupy Wall Street lately. But one branch of it, Occupy the SEC, has remained very busy -- filing amicus briefs, testifying before Congress, suing regulators and writing comment letters, including a 325-page opus on the Volcker Rule. After quickly taking stock of how it turned out Tuesday, they gave the final version a "C-". Occupy's Akshat Tewary and Eric Taylor explained what problems they still have with it.

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Wall Street figured out how to securitize your rent. Should you worry?

Wall Street figured out how to securitize your rent. Should you worry?

The housing crash created a lot of problems. Millions of families lost their assets. Neighborhoods emptied out as homes went into foreclosure. The rest of the economy went into a tailspin.

Investment funds had a problem too: They largely lost the market for residential mortgage-backed securities that had provided such excellent yields in the early 2000s, and with the Federal Reserve keeping interest rates low, there aren't a whole lot of obvious sources of income. For the past three or four years, they've been hunting for new places to park their money that could generate substantial returns. Lucky for them, the crash brought about by those very securities had also created an opportunity: Not mortgage payments on homes that a buyer would eventually own outright, but rent checks that a tenant would keep sending forever.

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Meet Preet Bharara, who just won the biggest insider trading case ever

Meet Preet Bharara, who just won the biggest insider trading case ever

Today, the long-running insider trading case against Steve Cohen's SAC Capital Advisors came to a resolution -- the firm pleaded guilty, and Preet Bharara had won again.

Bharara is a name you've probably heard even if you don't pay much attention to Wall Street legal intrigue. Over his three years as the U.S. attorney for the Southern District of New York -- the most prestigious and powerful prosecutor gig in the country -- he's taken down the world's most threatening terrorists, cybercriminals and corporate wrongdoers, and will probably be worth keeping an eye on after his term expires next year. Here are a few things you ought to know.

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Want a sign that tech’s grown up? Twitter chooses the snooty NYSE.

Want a sign that tech’s grown up? Twitter chooses the snooty NYSE.

Life is full of choices. Pepsi or Coke. iPhone or Android. Paper or plastic. Each decision reflects a consumer's core values, and the image she or he wants to project to the world.

Publicly traded companies, too, face an important choice: Nasdaq or New York Stock Exchange. Each one has its pluses and minuses. And increasingly, they're starting to fight over what companies list their shares where.

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The tea party thinks it hates Wall Street. It doesn’t.

The tea party thinks it hates Wall Street. It doesn’t.

When it comes to financial regulation, there are no substantial issues on which tea party Republicans differ from Wall Street.

This fact may surprise you, because the latest argument among conservatives is that the tea party agenda isn't shaped by the financial sector. In fact, they'll say, the tea party is where the smartest ideas on financial reform are being generated.

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Fewer Harvard MBAs are going to work on Wall Street. That's great news.

In this morning's Wall Street Journal, the head of the world's largest futures exchange sounds the alarm: Fewer Harvard Business School graduates are going to work in finance. That's a travesty, he says, because financiers make the economy go round.

Financial-service firms do the behind-the-scenes work of the U.S. economy, making the widespread impact of their work difficult to quantify—and difficult for both Wall Streeters and Main Streeters to recognize. But the invisible hand of financial firms gives small businesses the loans they need to grow. It helps major airlines hedge jet fuel, price-risk management that means more flights for passengers. Financial services mitigate a farmer's risk of price fluctuation at harvest, allowing him to plant more crops. These benefits keep businesses of all sizes growing...

American finance has always been a place for entrepreneurial risk-takers. Historically, Wall Street has been a haven for young people who are passionate about changing the world with a powerful idea. Now it seems that those young people are much more likely to head for Silicon Valley. Yet where will much of the financing for their projects originate? On Wall Street. I have deep concerns about where the financial-services industry is going if we've lost our ability to connect with those people.

Finance is about more than work and money. It is about empowerment and contribution. We need to demonstrate how the best bankers, traders and investors have not only talented minds but empathy and insight into what makes people tick—and the resources to help them prosper.

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How Wall Street stopped worrying and learned to love global turmoil

How Wall Street stopped worrying and learned to love global turmoil

These are perilous times. Syria is in flames, with Western missile strikes increasingly likely in what had been only a bloody domestic affair. Emerging markets are in free fall; most dramatically, the Indian rupee has been plummeting, and cash has also been gushing out of Indonesia, Brazil and other nations. And the United States once again stands on the verge of a fiscal stand-off, with political dysfunction putting at risk the ability of the federal government to stay open and even to pay its debts.

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Why is the U.S.'s 1 percent so much richer than everywhere else?

Why is the U.S.'s 1 percent so much richer than everywhere else?

It's been nearly two years since Occupy Wall Street took over Zuccotti Park, and the academic establishment is still chewing through questions it raised about how to understand the 1 percent in America. In particular, how did they get so darn rich? And what would happen if we took some of their money away?

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The Wall Street Journal just ate the Onion's lunch

"I represent the majority of citizens," announces a Wall Street Journal editorial board member fulminating about the blue bicycles that have "begrimed" New York's "finest, most picturesque" neighborhoods and the "totalitarians" who have put them there.

Via James Fallows, who adds, "Henceforth when you read the Journal's editorials, I invite you to hear this voice, expression, and tone."

WonkFeud Part 2: The labor force participation debate gets real

WonkFeud Part 2: The labor force participation debate gets real

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.

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WONKFEUD: Why the Wall Street Journal is wrong about labor-force participation

WONKFEUD: Why the Wall Street Journal is wrong about labor-force participation

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.)

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Could Dodd-Frank be unconstitutional?

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.

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One Republican's plan for stopping Too Big to Fail

One Republican's plan for stopping Too Big to Fail

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.

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No, Wall Street's not sending a 'sharp and unambiguous message' against taxes

No, Wall Street's not sending a 'sharp and unambiguous message' against taxes

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.

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Yes, the middle class really is falling behind

Yes, the middle class really is falling behind

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."

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Banker pay is (finally) falling

Banker pay is (finally) falling

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."

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Wall Street isn't that worried about the fiscal cliff. Is it savvy or stupid?

Wall Street isn't that worried about the fiscal cliff. Is it savvy or stupid?

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.

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How much did the financial crisis cost us? $12.8 trillion, one group says

How much did the financial crisis cost us? $12.8 trillion, one group says

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.

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Romney vows to repeal Dodd-Frank. The law’s biggest critics doubt that will happen.

Romney vows to repeal Dodd-Frank. The law’s biggest critics doubt that will happen.

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.

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Are the benefits of Wall Street reform impossible to quantify?

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.”

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JPMorgan: There may have been a ‘London Whale’ cover-up

JPMorgan: There may have been a ‘London Whale’ cover-up

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.

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Will regulators get it right on the Volcker Rule?

Will regulators get it right on the Volcker Rule?

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.

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‘Move your money’ threatens big banks in 2012

‘Move your money’ threatens big banks in 2012

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.

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No, the awful jobs numbers weren’t a fluke

JPMorgan’s chief economist Michael Feroli explains in a new research note:

The April Job Opening and Labor Turnover report was soft, lending some credence to the view that the April-May slowing seen in the payroll report was real and not a statistical fluke. The number of job openings in April fell 325,000 to 3.416 million, the lowest level since November of last year. Private job openings fell 282,000 — the most since early 2009 — to 3.080 million.

Nuts.

No, the awful jobs numbers weren’t a fluke

JPMorgan’s chief economist Michael Feroli explains in a new research note:

The April Job Opening and Labor Turnover report was soft, lending some credence to the view that the April-May slowing seen in the payroll report was real and not a statistical fluke. The number of job openings in April fell 325,000 to 3.416 million, the lowest level since November of last year. Private job openings fell 282,000 — the most since early 2009 — to 3.080 million.

Nuts.

Will the fiscal cliff hurt the economy? Wall Street says maybe

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:

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Will the fiscal cliff hurt the economy? Wall Street says maybe

Will the fiscal cliff hurt the economy? Wall Street says maybe

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:

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Should we raise taxes on Wall Street?

Should we raise taxes on Wall Street?

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.”

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Meet the right’s deregulatory brain trust

Meet the right’s deregulatory brain trust

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.

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Obama budget would double bank tax size

President Obama's budget plan calls for a bank tax twice as big as the one he proposed last year, a further sign he wants to make anti-Wall Street sentiment a major part of his re-election campaign.

 The bank tax, also known as the "Financial Crisis Responsibility Fee," first appeared in Obama's 2011 budget and was projected to raise $90 billion over 10 years. A year later, in the wake of the mid-term elections and accusations from executives that Obama was "anti-business," the White House cut the proposal by two-thirds to just $30 billion.

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Did Bloomberg do Occupy Wall Street a favor?


(EMMANUEL DUNAND - AFP/GETTY IMAGES)
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.

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Occupy Wall Street’s big win in one graph


(Dylan Byers/Politico)
“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.”

The 99% and 1%: Not so different, after all


(Goldman Sachs)
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.

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The wonkiest signs from Occupy 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.

Financiers for Occupying Wall Street

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.

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Underemployment in the Lesser Depression

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:


(Jess Jiang/NPR)

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.

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A tipping point for Occupy Wall Street


Katie Rogers/The Washington Post
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.

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The four habits of highly successful social movements

(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)


Occupy Wall Street participants are protesting corporate greed. (Spencer Platt - GETTY IMAGES)
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.

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