Wall Street was targeted presumably because the marchers think that they are getting away with crimes against the people and they profit at the expense of others’ misery.

Bernie Madoff was sentenced to 150 year in prison. Jeffrey Shilling from Enron is serving time as is Tyco CEO Dennis Kozlowski.  Richard Scrushy from Healthsouth is serving a seven year stretch.  Martha Stewart and other less notable ficures have served time for abuse of our financial system.

But beyond justice for criminal activity lies even greater loss.  Countrywide, Merrill Lynch, Bear Sterns, Wachovia, and numerous other banks and firms no longer exist as independent entities as a result of poor decisions and reckless risk exposure.  Stockholders lost billions and the wealth of CEOs were also cut significantly. Dick Fuld at Lehman Brothers lost hundreds of millions of dollars as his company went bankrupt. While there is much to criticize on Wall Street, let’s not forget that they are not immune to the reach of justice within our legal system or the even harsher  discipline of the market.

Do they benefit from the misery of others?  Isn’t this true of doctors and lawyers?  Most of the mindless at OWS seem to have no clue what Wall Street does or how our financial system and economy fucntions.  While they blame Wall Street almost exclusively they should be skeptical of the information they are fed. At Investor’s Business Daily Paul Sperry writes Wall Street Bashers Owed True Look At Crisis Roots.

Excerpt:

From the opening gavel, Angelides, a Pelosi crony appointed by the former speaker, declared ex-Countrywide Financial CEO Angelo Mozilo “off limits” in the investigation. He failed to call to testify the subprime lender who was the largest source for private mortgage-backed security tranches used to create CDOs for nine of the 10 largest CDO underwriters on Wall Street. Why?

Mozilo was not only a big Democrat donor, but employed Pelosi’s son as a Countrywide broker and sales manager.

And if Mozilo were allowed to testify, the public might learn the inconvenient truth that HUD pressured him to originate nearly $800 billion in toxic loans (later sold to Fannie and Freddie) to meet “fair lending” pledges he signed under HUD’s little-known Best Practices Initiative “to help wipe out discriminatory practices in mortgage lending.” This, of course, would have undercut the commission’s “predatory lending” story line.

Charles Krauthammer noted the danger of populist demagoguery in The Scapegoat Strategy in the National Review online 10/14/11:

Excerpt:

Problem is, this kind of populist demagoguery is more than intellectually dishonest. It’s dangerous. Obama is opening a Pandora’s box. Popular resentment, easily stoked, is less easily controlled, especially when the basest of instincts are granted legitimacy by the nation’s leader.

I have noted in several recent posts the anti-Semitic element in the OWS rallies.  Liberal Phyllis Chesler has warned for years of the anti-Semitic element that has taken root on the left side of the spectrum.  At her site she posted An Open Letter to the ‘Good Liberal’ Who Ignores Occupy Wall Street’s Jew Hatred 10/19/11.  Her point is that ignoring anti-Semitism does not contain it.
The Weisenthal Center posted Excerpts from an essay from Rabbi Abraham Cooper and historian Dr. Harold Brackman on anti- Semitism on the fringes of the Occupy Wall Streeters…

Excerpt

…If the Occupy Wall Streeters really want their movement to achieve mainstream credibility, they should begin by policing their own ranks… social and political civility must also prevail. The Occupy Movement’s leaders in LA as well as New York need to disown the purveyors of hate within their ranks. They must pull the plug on the bigots amongst them who view the slogan of fighting the detested “1 percent of fat cats” as their opportunity to mainstream the hatred of Jews.

Pajamas Media offered a collection of some of the anti-Semitic rants: More Anti-Semitism at Occupy Los Angeles.

But the socially destructive attitude exhibited is not limited to anti-Semitism.  Dennis Prager well notes  in The Left’s Dangerous Class Hatred in The National Review 10/18/11.  He notes that class hatred is not materially different from racism:

Excerpt:

Being on the left means that you divide the world between rich and poor much more than you divide it between good and evil. For the leftist, the existence of rich and poor — inequality — is what constitutes evil. More than tyranny, inequality disturbs the Left, including the non-Communist Left. That is why so many on the Left fell in love with Fidel Castro, Hugo Chávez, and, at other times, with every left-wing dictator. Non-leftists see these men as thugs; much of the Left sees them as fighters for equality.

Perhaps this explains why anti-Semitism so easily takes root in leftist regimes and at the OWS rallies.  The history of anti-Semitism is so attached to the Jewish prominence in the financial and banking sectors that it is was not at all unpredictable that it would surface as a result of the class warfare rhetoric.

When the Oklahoma bombing occurred during the Clinton presidency, he noted his opinion that the right wing radio talk show rhetoric (spelled Limbaugh) contributed to the tragedy.  When Congresswoman Gabrielle Giffords  was shot in Arizona, noted voices on the left jumped on right wing rhetoric before we knew anything about the psycho shooter.  Obama, to his credit, diffused this when he spoke at the funeral of the many victims.

His harping on class warfare topics, however,  feeds the extremists marching on Wall Street.  As Krauthammer notes, this passion is more easy to ignite than to control and extinguish.  In the absence of a clear and reasonable message the movement is attracting anti-Semitics, Nazis, Communists and other extremist elements.  These elements should be loudly disavowed, not ignored.

The mindless prefer demons to understanding and solutions.  This is the essence of conspiracy theorists.  Our financial system provides a useful function, in spite of its noted flaws and abuses,  but few people outside of the system understand it well, and it thus provides a useful adversary. The OWS crowd is divided between the incredibly ignorant and those who seek  to exploit them.

The mindless also avoid clarity. What is excess wealth? Earning fifty million dollars on Wall Street is evil, but apparently this is less true if you are Oprah Winfrey, Michael Moore, or a professional baseball player.  Excess wealth is wealth earned in a less approved profession.  Walter Williams noted further that the target is more about acquiring power in Pitting Us Against Each Other:

Excerpt:

… promoting jealousy, fear and hate is an effective strategy for politicians and their liberal followers to control and micromanage businesses. It’s not about the amount of money people earn. If it were, politicians and leftists would be promoting jealousy, fear and hate toward multimillionaire Hollywood and celebrities and sports stars, such as LeBron James ($48 million), Tiger Woods ($75 million) and Peyton Manning ($38 million). But there is no way that politicians could take over the roles of Oprah Winfrey, Lady Gaga and LeBron James. That means celebrities can make any amount of money they want and it matters not one iota politically.

During this OWS flea fest it is also worth noting that the city with the highest per capita wealth is DC.  As noted by economics blogger Mark Perry in his Carpe Diem:

Excerpt:

The U.S. capital has swapped top spots with Silicon Valley, according to recent Census Bureau figures, with the typical household in the Washington metro area earning $84,523 last year. The national median income for 2010 was $50,046.

The figures demonstrate how the nation’s political and financial classes are prospering as the economy struggles with unemployment above 9 percent and thousands of Americans protest in the streets against income disparity, said Kevin Zeese, director of Prosperity Agenda, a Baltimore-based advocacy group trying to narrow the divide between rich and poor.

“There’s a gap that’s isolating Washington from the reality of the rest of the country,” Zeese said. “They just get more and more out of touch.”

(this was published previously in the Macon Telegraph)

Being in the middle of a record economic crisis presents a rare learning opportunity.  Several books are worthwhile for those seeking to understand what just happened.

Too Big to Fail by Andrew Ross Sorkin details the action of the Fed under Benanke and Treasury under Paulson during the crisis period between August and December.  While Geitner as head of the New York Fed was also featured the central player of this crisis was Hank Paulson.

Monumental decisions involving billions of dollars of assets were made in days, sometimes hours.  Both Paulson and Geitner had a sense that the market was due for a correction long before the crisis hit, but they probably did not see it coming as fast and as broad as it did. Bernanke noted that just as there are no atheists in foxholes there are no ideologues in economic crisis either. Neither Republicans or Democrats wanted to bail out Wall Street , but the crisis dictated actions that were against the grain of capitalists of both parties.

Paulson worked tirelessly to find appropriate merger partners for weak players like Merrill Lynch, Wachovia, and Lehman.  He almost had Barclays ready to buy Lehman when the British Financial Services Authority ( FSA) refused to approve the acquisition/merger because of the risk it brought to the British financial system.

Lehman was singular in the fact that it was not acquired or bailed out and thus had to go bankrupt.  Part of this was timing; Congress was just in no mood to bail out a Wall Street player.  Part of the reason was George Bush’s cousin who worked for Lehman and his brother Jeb’s association with the firm. Such close political relations probably worked against the interests of the firm.

In retrospect bailing our Lehman’s may have forestalled the panic that engulfed the rest of the system. With Bear Sterns gone and now Lehman’s gone, depositors wondered who was next and there began a run of the other banks like J.P Morgan and Morgan Stanley.

While Paulson’s association with Goldman was suspect the fact was he had to severe his tie and sell his stock ($485 million worth) in order to take his job at Treasury. Since his actions were so scrutinized he was careful to avoid even conversations that would indicate favoritism toward his old firm.

The most difficult decision was to bail out AIG whose credit default swaps acted as insurance against many of the cdo’s (collateralized debt obligations) that infected the financial markets. As the underlying assets plummeted in value AIG was downgraded and had to put up more capital that it could not provide.

Having to make such massive changes and decision in such short time meant that perfection was not obtainable. Barney Frank justifiably wanted some assurance that compensation to the executives would suffer from their misdeeds, but there simply was not enough time to rule of thousands of contracts during the time period that decisions had to be made.

Wall Street clearly engaged in risks it did not understand, but neither did the regulators such as Greenspan and his successor Bernanke. Complicated risk models gave the CEO’s delusional certainty, but eventually the party came crashing down for the same reason all bubbles burst;  lack of trust and confidence.

But Sorkin spends little space getting into the detail of the causes of the crash and suitably stays focused on the urgency and the actions required in response. 

For more information on the background that caused the crisis I recommend The Housing Boom and Bust by Thomas Sowell,  Financial Fiasco by Johan Norberg, most of all After the Fall: saving Capitalism from Wall Street – and Washington by Nicole Gelinas.

Sowell and Norberg focus more on the misguided Government fiscal and monetary policies that inflated the housing bubble, but Nicole Gelinas also analyzes which good regulations were unfortunately removed (and by who) and which bad ones were inappropriately applied.

A crisis of this nature required the perfect storm of many great errors to all focus their retribution at the same time. Unfortunately the media large engages in partisanship and demonization and few people will take the time to understand what happened and why.  It is complicated but engaging the problem reveals basic principles of sound policy that were violated as they were in previous bubbles.

History repeats itself but never the same way.