Thursday, June 30, 2011

Another Giant Sucking Sound?

It’s been an article of liberal faith that the financial crisis was caused by a failure to regulate the banking system.

So, the Democratic Congress and President crafted something called the Dodd-Frank financial reform bill. Finally, the government would be able to place strict controls on Wall Street greed.  

Honorable people have different opinions on what caused the crisis of 2008. Different analyses lead to different policy prescriptions. If you want to know which is right and which is wrong, you can get a first indication by putting one of the policies into practice. They you can judge it by the effects it produces. It’s called a reality check.

In 1992 Ross Perot found his political voice when he started complaining about a “giant sucking sound” that was taking jobs out of America and into Mexico.

Today we are starting to hear a new sucking sound. It may not be gigantic, but it is beginning to suck jobs out of Wall Street and into Singapore.

Charles Gasparino reports: “Why is Goldman Sachs preparing to outsource traders, salespeople and investment bankers from here in America, where it has made untold billions over the years as Wall Street's premier trading firm, to places like Singapore and India?

“The answer can be found largely in the 2,000-plus pages of last year's Dodd-Frank financial ‘reform’ law -- which will eventually translate into some 40,000 pages of regulations. The financial industry is still frozen, waiting to find out how bad these regs will turn out; but what all the CEOs of the big banks know for sure is that it's about to get a lot more expensive to do business here.”

And also: “It's not just Goldman, which wants to expand a once-tiny Singapore office by hiring 1,000 executives while it contemplates a major job reduction at home. (Yesterday, Goldman told the labor department it's cutting at least 230 jobs.) Just about every major US bank is looking at outsourcing as a way to pay for the new costs of doing business as regulators hammer out new rules.”

Now to the fun part. Gasparino explains: “The biggest irony is that Wall Street has long been the engine financing the New York welfare state -- yet it's being squeezed by lefty politicians who believe in expanding the national welfare state.

Gasparino calls New York a welfare state-- it used to be called the Empire State-- because, in New York City, 40,000 people pay one half of the taxes.
That’s one half of one percent of the population paying one half of the taxes.

For those who want to soak the rich, New York is your kind of town.

But let’s be fair and balanced. It’s not just the leftist politicians who are destroying jobs in New York by punishing the Wall Street bankers. These same Wall Street bankers who are complaining most vociferously about Dodd-Frank are also self-proclaimed liberals.

Wall Street loved Barack Obama, far more than it loved his opponent. It raised vastly more money for him than it ever did or will for any lowly Republican or Tea Party candidate.

Wall Street is filled with true believing liberal Democrats who somehow or other did not grasp the implications of handing power to liberal Democrats in Washington.

Were it not for the fact that a sustained exodus of high-paying jobs is going to cause severe pain in New York City one would sit back and revel in the Schadenfreude.

Still, we offer no pity to the liberal Wall Street banker who is, in Shakespeare’s immortal words: “hoist with his own petard.”


David Foster said...

For all the Wall Street bashing that goes on, "progressives" of the Obama stamp are far more comfortable with bankers, brokers, etc than with people who run manufacturing, transportation, or retailing companies. The situation is analogous to the traditional English class structure, in which it was best to be a non-working landowner, next best to be a government official, marginally acceptable to be in finance, and not at all acceptable to be "in trade."

See "English Culture and the Decline of the Industrial Spirit," by Martin Weiner. Apparently, the class prejudice noted above got significantly worse in the mid-to-late 1800s:

“At the time of the Great Exhibition of 1851, Britain was the home of the industrial revolution, a symbol of material progress to the world…By the nineteen-seventies, falling levels of capital investment raised the specter of outright “de-industrialization”…The emerging culture of industrialism, which in the mid-Victorian years appeared, for good or ill, to be the wave of the future…was itself transformed….the later nineteenth century saw the consolidation of a national elite that, by virtue of its power and prestige, played a central role both in Britain’s modern achievements and its failures. It administered the most extensive empire in human history with reasonable effectiveness and humanity, and it maintained a remarkable degree of political and social stability at home…It also presided over the steady and continued erosion of the nation’s economic position in the world. The standards of value of this new elite of civil servants, professionals, financiers, and landed proprietors, inculcated by a common eduction in public schools and ancient universities and reflected in the literary culture it patronized, permeated by their prestige much of British society beyond the elite itself. Those standards did little to support, and much to discourage, economic dynamism. They threw earlier enthusiams for technology into disrepute, emphasized the social evils brought by the industrial revolution, directed attention to issues of the “quality of life” in preference to the quantitative concerns of production and expansion, and disparaged the restlessness and acquisitiveness of industrial capitalism.”

Stuart Schneiderman said...

This sounds like a great book. I just ordered a copy. Thanks for bringing it to our attention.

Amabel said...

This will not really work, I suppose this way.