Washington Post Actually Worth Reading Today
by David Atkins
I normally cringe when I make my way to the Washington Post website. Of the major papers, the Post is usually the worst offender for faux objectivity, pandering to Beltway conventional wisdom, and “he said-she said” stenography disguised as journalism.
But there are a couple of excellent pieces at WaPo yesterday and today well worth reading. The first is a superb op-ed by Barry Ritholz:
I have a fairly simple approach to investing: Start with data and objective evidence to determine the dominant elements driving the market action right now. Figure out what objective reality is beneath all of the noise. Use that information to try to make intelligent investing decisions.
But then, I’m an investor focused on preserving capital and managing risk. I’m not out to win the next election or drive the debate. For those who are, facts and data matter much less than a narrative that supports their interests.
One group has been especially vocal about shaping a new narrative of the credit crisis and economic collapse: those whose bad judgment and failed philosophy helped cause the crisis.Rather than admit the error of their ways — Repent! — these people are engaged in an active campaign to rewrite history. They are not, of course, exonerated in doing so. And beyond that, they damage the process of repairing what was broken. They muddy the waters when it comes to holding guilty parties responsible. They prevent measures from being put into place to prevent another crisis.
Here is the surprising takeaway: They are winning. Thanks to the endless repetition of the Big Lie.
A Big Lie is so colossal that no one would believe that someone could have the impudence to distort the truth so infamously. There are many examples: Claims that Earth is not warming, or that evolution is not the best thesis we have for how humans developed. Those opposed to stimulus spending have gone so far as to claim that the infrastructure of the United States is just fine, Grade A (not D, as the we discussed last month), and needs little repair.
Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.
Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.
The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street, stunned observers by exonerating Wall Street: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”
As much traction as the 99% have gained in focusing the bright light of scrutiny on Wall Street, there are a huge number of people in this country who believe this zombie lie. They believe that government forced big banks to lend to poor minorities as a welfare program, and that the big banks would have lent responsibly but for Big Government’s interference. No matter how many times Krugman, Taibbi, Michael Lewis, Ritholz and others disprove the lie, it never dies. In fact, it keeps growing stronger.
It does so because facts don’t matter to conservatives. Emotional “truths” that they can feel in their gut do. Conservatives just “know” that the free market “works,” and that left to their own devices without interference, the great institutions of capitalism would never make gigantic reckless bets that crash the entire system in the pursuit of greed. They also “know” that everything wrong with America is attributable to do-gooder bleeding heart liberals taking (white) producers’ hard-earned tax money and giving it (brown) lazy people without the smarts or work ethic to have earned it. Therefore, if the financial system crashed, it must have been due to government forcing the great John Galts of finance to lend to the parasites, rather than due to an over-financialized system run by greedheads in pursuit of an American Versailles.
And no matter what, no bank bailouts would have been necessary because “free markets” don’t fail; they can only be failed. Mass bank failures would simply be creative destruction, rather than catastrophic, Great Depression inducing events.
For about 30-35% of the American electorate defined as the conservative base, facts are irrelevant. Emotional truths rule. The Big Lie is easy to tell, because it’s easy to swallow. These people aren’t about to join the 99% protesting Wall Street, because they see Wall Street as the victim of Barack Obama’s Socialist Commie Nazi policies.
Which, of course, is really ironic considering the second article worth a read in today’s Post:
President Obama calls people who work on Wall Street “fat cat bankers” and his reelection campaign will try to harness public frustration with Wall Street. Financial executives, for their part, say the president’s pursuit of new financial regulations are punitive and “holding us back.”
But both sides face an inconvenient fact. During Obama’s tenure, Wall Street has roared back even as the larger economy has struggled.
The largest banks are larger today than when Obama took office and are returning to the level of profits they were making before the depths of the financial crisis in 2008, according to government data.
Wall Street firms — either independent companies or the high-flying trading arms of banks — are doing even better. They’ve made more profit in the first 21 / 2 years of the Obama administration than they did during the entire Bush administration, industry data show.
Behind this turnaround are government policies that saved the financial sector from collapse and then gave banks and other financial firms huge advantages on the path to recovery. For example, the federal government invested hundreds of billions of taxpayer dollars in banks, money that the firms used for risky investments on which they made huge profits.
Reviving the financial system was necessary for preventing an even deeper economic recession. But the Bush administration, which first moved to bail out Wall Street, and the Obama administration, which ultimately stabilized it, took a far more tepid approach to helping ordinary Americans, critics say.
“There’s a very popular conception out there that the bailout was done with a tremendous amount of firepower and focus on saving the largest Wall Street institutions but with very little regard for Main Street,” said Neil Barofsky, the former federal watchdog for the Troubled Assets Relief Program, the $700 billion fund used to bail out banks. “That’s actually a very accurate description of what happened.”
This is ultimately American politics in a nutshell. Republicans do Wall Street’s bidding, telling lies about the entire economic system and blaming the unfortunate and the middle-class alike for their troubles. Democrats do slightly less of what Wall Street wants while using the occasional populist rhetoric, but Wall Street still gets most of what it wants. For their trouble, Democrats get portrayed as Communists. Meanwhile, most of the rest of the country fights endless culture wars–wars with consequences, mind, but wars that don’t impact the precious, precious market indices.
About 25% of the country thinks that Dems are right, or that Dems are too conservative and beholden to Wall Street. About 35% of the country “knows” in their gut that conservative “truths” are right, no mater how much actual evidence runs to the contrary. Evidence doesn’t matter to them. A bunch of people with mixed views in the “middle” vote social issues and / or their frustrations, and / or whichever person they’d rather have a beer with. And the rest vote the way their nice neighbor or pastor told them to.
And yet, for all its flaws, this is still the only system we have that allows us to create change. That may be the scariest reality of all.
.