Wall Street's Welfare Queens

As the furor over AIG bonuses fades, Paul Krugman today points to a real outrage: "pay at investment banks, after dipping last year, is soaring again--right back up to 2007 levels."

Such a symbol for unquenchable Wall Street greed may serve a political turning point just as did Ronald Reagan's Welfare Queen who drove a Cadillac three decades ago--with a number of added ironies.

Unlike the Great Communicator's character who was never found to exist, today's investment bankers are all too real and, in the 21st century, are ripping off taxpayers on a scale never imagined in Reagan's wildest dreams. The Welfare Queen's $150,000 has morphed into billions.

As Krugman observes, "Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a 'welfare.'"

Perhaps the ultimate irony is that the level of Wall Street compensation has always been disproportionate to achievement but turned astronomic only in recent years, as Krugman notes, as "a reward for their creativity--for financial innovation...new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes."

But the reemergence of such greed may eventually prove to be as powerful a symbol for a new populism as Reagan's Welfare Queen was for the rise of conservatism in the 1980's.

Almost 70 years ago, Fred Schwed in his Wall Street classic "Where Are the Customers' Yachts?" noted: "The burnt customer certainly prefers to believe that he has been robbed rather than that he has been a fool on the advice of fools."

That feeling seems to be stirring again.

A Trillion Here, a Trillion There

A publisher I knew once proposed a picture book, "They Must Know What They're Doing or They Wouldn't Be Where They Are," to show the captain of the Titanic, the designers of the Edsel, LBJ running the War in Viet Nam and other overseers of spectacular 20th century blunders.

The Bush Administration now rates a sequel all its own for being in charge of two cataclysms, in the Middle East and here at home.

As Bear Stearns, the poster boy for Wall Street greed, gets gobbled up with the help of taxpayer money, Paul Krugman today asks, "When the feds do bail out the financial system, what will they do to ensure that they aren’t also bailing out the people who got us into this mess?"

Not much is the answer, he points out, citing "false beliefs in the private sector" that "led to an epidemic of bad lending" and how "false beliefs in the political arena --the belief of Alan Greenspan and his friends in the Bush administration that the market is always right and regulation always a bad thing--led Washington to ignore the warning signs."

Now even the temple of free enterprise, Rupert Murdoch's Wall Street Journal, is yelling "Uncle," editorially calling for a "more aggressive, and pre-emptive, regulatory role for the Fed...to restore its monetary credibility, or today's panic could become tomorrow's crash."

In assessing the cost of Iraq and the financial meltdown here, Washington is going to have update Everett Dirksen's old maxim, "A billion here, a billion there, and pretty soon you're talking about real money." Just add the zeroes and pray for some real brains and leadership in the White House next year.