Humanity’s literature from the very earliest days has many stories of hubris and arrogance that ring true. Icarus got too close to the sun, and had his wings burned off. Goliath got a little too cocky with the kid with the slingshot. Lady Macbeth’s dreams of glory turned to ashes. Pride goeth before the fall indeed.
It happens in literature so much because it happens to humans so much. In my career in politics, I have seen it happen over and over again, from the highest of levels to the ones you’ve never heard of, like the 26-year-old junior staffer at the Clinton White House I once heard yelling into the phone “Don’t you know who I am?” who was fired shortly after. There are plenty of arrogant politicians walking around D.C. today bragging about everything they are going to do that I suspect won’t be here very much longer.
But there is no match at all for the hubris of Wall Street bankers. They are convinced they really are masters of the universe, but I think they will be heading for a fall. It may be soon, it might take a little while given the money they have and the politicians in their pocket, but you cannot be that arrogant and not be in for a serious fall.
Just to recap: the financial industry talked politician after politician from both parties into one round of deregulation after another, all the while increasingly consolidating the industry while inventing more and more exotic kinds of financial speculation (derivatives, credit default swaps, CDOs, etc., etc., ad nauseam). There were warning signs aplenty- the S&L debacle, Long-Term Capital Management, an early version of a subprime derivative collapse, the Mexico currency collapse, the Thai currency collapse, the corporate accounting scandals of the early 2000s — and each time some combination of the Federal Reserve and/or American taxpayers directly had to step in and save the day. The warning signs were not only ignored, but more deregulation usually happened on top of the old kinds. When the big collapse happened in 2008, the American economy and entire world economy were sent into collapse and panic, only to be saved by the biggest corporate bailouts in history by far.
Now you may find me biased, but this essential summary as far as I can tell seems to be pretty much accepted by just about every author on the financial collapse, financial blogger and reporter, the Angelides commission, the TARP oversight board: pretty much everyone who has looked into the collapse except those being paid by Wall Street bankers. And given all that, you would think the corporate PR guys for these big banks would be advising their clients to lay low for a while, make a show of how badly they felt, do at least some symbolic belt-tightening and some early retirements for the most visibly corrupt executives, maybe make some major donations to charities. On Capitol Hill, you would think the lobbyists they hire would advise them to show some amount of humility at congressional hearings, to make clear in their public statements that they totally understand the need for some “modernization” of regulations (even while fighting to soften the blow behind the scenes as much as possible), and to make sure their longtime allies on the Hill know they didn’t need to spend a lot of political capital right now defending them — that the best strategy was to quiet things down and delay or soften things, not to make a lot of noise.
But the Wall Street guys are so arrogant, so completely used to running the world and having everyone bow down to them, that they just fundamentally don’t get it. They give themselves record setting bonuses the year after taxpayers bailed them out. They fought every minor restraint on their power in the battle over financial reform last year, and now their Capitol Hill allies are planning to re-open the whole battle again with new legislation rolling back key components of the bill like the Consumer Financial Protection Bureau, derivative regulation, and swipe-fee regulation. They get their allies on the Hill to beat up on Elizabeth Warren because she is actually trying to help consumers. They bitterly and loudly complained to reporters and anyone who would listen about President Obama saying a few mildly populist about them during the financial reform fight last year, even though Obama’s Treasury Secretary and most of his other appointees have been fairly friendly to bankers throughout his term in office. They complain about the moral hazard of helping homeowners who are underwater on their mortgages despite taking the bailout money when their own bets went bad.
But these remarkably arrogant folks are setting themselves up for a fall. Anger has been building against Wall Street bankers for years, and banks are consistently listed in polls as the most unpopular institutions in America. The movement against them is growing every day with demonstrations and move-our-money kind of actions by everyone from local governments to churches to foundations. A great new report just came out of a group of California organizations on the incredible cost of all the foreclosures the banks are doing right now. Bloggers are doing a remarkable job in documenting all the illegal actions banks have been taking in terms of foreclosures and fraud in general. Check out this powerful piece on crimes committed by bank executives by naked capitalism. Activists are demanding that they actually start paying taxes on their ill-gotten gains. Lawyers are filing case after case against banks for committing fraud in the foreclosure, and the banks have been losing a lot of those cases in court. Ministers are even doing exorcisms of the banks.
The other key thing to note is that it is not just progressive activists who are getting upset with the bankers: a lot of small businesspeople are being gauged by swipe fees, or left out in the cold in terms of getting loans because bankers would rather hoard their money or use it to speculate on derivative markets. Investors who have gotten screwed by the big banks are increasingly looking to file lawsuits. State and local officials are pushing back more and more against abusive bankers.
Wall Street bankers are looking around at all these activities and laughing, assuring themselves that no one can touch them because they are so rich and so powerful. But sooner or later, guys, what goes around will come around. Here’s just one example: if they want to bring up the financial reform issue again in Congress, just remember that the bill last year just got stronger every time it went to the floor because nobody wanted to vote against amendments that were tough on Wall Street banks. If you want to get into a floor fight, reformers will be happy to start offering amendments all over again, and we’ll see what we can get passed. You don’t like the derivatives regulations? Well, our side thinks they need to be tougher. You don’t like the CFPB? Well, we think they need more power. You don’t like debit card rules? Well, let’s expand them to credit cards as well. We can win a lot of these floor fights because it is pretty easy right now to argue against bankers; it’s what we call in my political consulting business a resonant message.
But this isn’t just about the next legislative fight. Grassroots anger at the banks continues to build, and the more arrogant the Wall Street guys act, the more angry people will get. Their own hubris will bring them down quicker than Icarus fell from the sky. If I were a strategist for the Wall Street bankers right now, I’d sure be encouraging them to read some mythology and Shakespeare — and a few lessons from scripture probably would do them some good as well.