Mises Wire

The Rage Against Wall Street Isn’t Just Anti-Capitalism

Rick Santelli yesterday went on one of his trademark rants, this time extolling the virtues of Wall Street and complaining about the anti-Wall Street sentiment that has become prevalent during the current election cycle.

On the banks and Wall Streeters, he says, they have a “big bulls-eye in their back” and proclaims “these are great industries and they are run well.” 

He then trails off into incoherence talking about how huge conglomerates with intellectual property are hapless victims, and then compares modern bankers and Wall Streeters to the heroes of Ayn Rand’s novel Atlas Shrugged.  

All we’re left taking away from this is the suspicion that Santelli doesn’t understand the root of the anti-Wall Street sentiment. Or, he understands it and doesn’t care. 

There has always been anti-capitalist hostility to Wall Street and banks, of course, but a major driver behind the hostility to banks today is driven not by a newly re-invigorated hatred for markets, but by a realization that there is one set of rules for the big banks and for Wall Street, and another set of rules for everyone else. The big banks get hundreds of billions in taxpayer money every time they go insolvent, and then the Wall Streeters make a fortune. And every day, the Fed and other central banks makes sure and set policy in such a way that will not hurt Wall Street and the financial elites. 

Santelli has always been a moderate on the bailouts, and felt in 2008 only that more time should be taken to work out the details. He certainly didn’t oppose the bailouts. Moreover, his later and more famous 2009 rant, wasn’t in opposition to the trillion dollars in taxpayer money shoveled to the big banks and Wall Street. His problem was that some defaulting homeowners might receive a few bucks to stay in a house they couldn’t afford. Santelli was deathly afraid of rewarding “losers” in 1,100-square foot KB Homes, but he seemed far less concerned about rewarding the presumed winners like Jamie Dimon who run their financial empires into the ground. 

So, if Santelli’s wondering why people are so angry, he might remember that the bankers and Wall Street benefits from the exploitation of taxpayers, small business people, and small-time investors and savers. People realize that we live in a world of Too Big to Fail where ordinary people are expected to submit to the up and downs of the marketplace while the wealthy of the financial sector will be bailed out every time something goes wrong. For them, it’s always up, but never down. Put another way: it’s socialism for the banks and Wall Street, and its capitalism for everyone else. 

It’s seems, however, that Santelli’s views are representative of a sizable portion of the Wall Street and banking world, which inexplicably insists on thinking of itself as a victim of circumstances that is under-appreciated by the troglodytes on Main Street. Those more in touch with reality, meanwhile, have noticed that the financial sector is the government’s special pet living at the expense of everyone else. It doesn’t have to be this way. There’s nothing inherently dishonest or exploitive about stock markets and financial institutions. Indeed, these institutions are essential to a highly-productive economy. But, the financial sector we have — right now — is built on government-facilitated exploitation and on fixing the game.

Thus, it’s difficult to explain Santelli’s bizarre equating of American bankers with the heroes of Atlas Shrugged. 

Atlas Shrugged, of course, was about entrepreneurs who functioned outside the ruling class and who made their living from the private sector. If the heroes of Atlas Shrugged were anything like modern American bankers and Wall Streeters, Rand would have had them sending lobbyists to ravage the taxpayers for more free money. Then, they would have gone to the central bank to keep the rent-seeking going indefinitely via monetary policy. 

It’s laughable to suggest that today’s financial sector would ever do anything like the Galt’s Gulch entrepreneurs who went on “strike” against the government, withholding their talents until they were appreciated. If Wall Street and the bankers did that, they might cut themselves off from the government gravy train. They’re not going to go off and “resist” in some far-off location. On the contrary, they’re going to keep collecting their free money from the Treasury in the form of bailouts the next time there’s a crisis, and they’re going to keep living off the central bank’s easy money. 

And lest anyone have any doubt about Wall Street’s dependence on the central bank, day in and day out, just wait until the next time the Fed hints that it might raise interest rates, and see what happens to the Dow. 

Quantitative Easing, after all, is the juice that keeps Wall Street fat and happy, and that juice is extracted from ordinary savers, just explained in this report from CNBC today in its article “Fed policy has cost savers $7.5 billion”:

The past 10 years have been very good for investors, but not so much for savers.

Since 2006, the S&P 500 stock market benchmark has surged more than 60 percent (and more than 200 percent if you count from the time the bull market began in 2009). In the same period, however, folks squirreling away their money in savings accounts have lost nearly $8 billion.

Both results are due in large part to a Fed policy that has sought to push money out of zero-yielding savings and money market accounts and into riskier assets, particularly stocks.

Monetary policy in service of Wall Street and the banks has constituted an immense transfer of wealth from small Main-Street workers and business owners to the wealthy financial classes. Their army of lobbyists and wealthy political donors in Washington ensure that the money keeps flowing, but it hasn’t gone unnoticed. 

Santelli whined: “Maybe we should shut Wall Street down for 24 hours, see how everybody who blames Wall Street for everything likes that. Maybe we should shut energy down for 24 hours, see how people like that.” 

But, most people who are mad at Wall Street aren’t calling for it to be shut down. Most regular people just want Wall Street to play fair, and even those who don’t understand how the central banks work have a vague (but correct) notion that the Fed rigs the game to benefit Wall Street. 

So, instead of shutting down Wall Street and the banks, how about we just start paying small time investors a decent interest rate on their savings? How about we end monetary policy that favors hedge funds and Wall Street billionaires at the expense of everyone else? How about the next time a huge bank goes insolvent, we don’t bail it out? 

Few people want Wall Street to go away. They just want it to stop living off stolen goods. 

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