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Congress vs. Wall Street

Which institution is more disliked, Congress or Wall Street?

The Financial Times today writes about President Obama's trip to Iowa, "in an attempt to fire up disillusioned supports and fend off a rout in November's congressional elections". The article concludes with a quote from Bill Schneider, an analyst at the left-leaning Third Way think tank:

If there is one institution that is less popular than Congress, it's Wall Street. There is a lot of anger out there about Wall Street and that will help him sell his presidency to the heartland.

I know a lot of people, especially liberals, think that politicians are held in much higher regard than investment bankers, but it's not true. The Associated Press writes today "Recent polls show that less than 30 percent of the public hold favorable opinions of Congress and Wall Street." In other words, both are disliked. Another poll found that Wall Street was viewed more favorably than Congress. Washington pols bashing Wall Street is not necessarily a vote-winner - because people can see where the criticism is coming from.

The senators who held yesterday's hearing with Goldman Sachs, led by Democrat Senator Carl Levin, ought to bear that in mind. Many do not see congress as the agents of the public's wrath against bankers. To me, the senators' posturing and grandstanding was really hard to take; it was obvious they were playing for the TV cameras, in the hope of gaining political support.

In the event, I don't think it worked. The politicians grilling Goldman representatives displayed a shocking lack of knowledge of investment banking (yes, I know, the world of synthetic CDOs and other instruments is very complex, but still), and Levin's repeated use of the word "shitty" made him, not Goldman, look un-classy. In attacking Goldman for shorting the mortgage market to balance their positions, it seemed as if Levin and others would have preferred Goldman had followed Bear Stearns and Lehman in staying long, and thus causing an even worse financial panic and even bigger bailout. The fact that Goldman's stock rose during the day showed that at least Wall Street's verdict was that the senators didn't really harm Goldman.

In a recent spiked article, I argued that the scapegoating of Goldman is really a cynical diversionary ploy adopted by opportunist politicians to shape the narrative about the crisis so that Washington avoids blame. Bethany McLean later made a similar argument in a persuasive New York Times op-ed. I completely agree with McLean's conclusion:

Come to think about it, shouldn’t Congress have its turn on the hot seat as well? Seeing Goldman executives get their comeuppance may make us all feel better in the short term. But today’s spectacle shouldn’t provide our government with a convenient way to deflect the blame it so richly deserves.

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