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WHY WALL STREET KOWTOWS TO OBAMA


Andrew McKillop

21st Century Wire

BACK TO SQUARE ONE…

In 2008, Goldman Sachs executives and employees were the largest single Wall Street backers of the president, but by 2012 things had changed. Obama had “meddled with the free market”, or perhaps had not been generous enough with billion dollar bailouts, the chemistry wasn’t right. Goldman Sachs Group, Morgan Stanley, Citigroup Inc., Bank of America, JPMorgan Chase and other Wall Street heavyweights gave $21 million to Mitt Romney, more than any other presidential candidate since the USA’s modern campaign system began in 1976, according to the Center for Responsive Politics.

And lost.

Being losers is uncomfortable for Never Lose fixers and dealers who even when they do lose, have a tame politician on hand to use public money to bail them out. Public debt-private profit is the name of the “free market” game, and the tame politicians can either change – or stay the same. Archibald Cox Jr., the chairman of Barclays Plc, and an outspoken, generous backer of Republican candidate Mitt Romney last year said in a recent interview with Bloomberg: “You don’t stand up and challenge openly the administration”. You work around your enemy and make him a friend, because he has the public cash you want, that you want with no strings attached.

Being losers, executives know and accept they have to live with four more years of Obama and will be making fewer “big, loud public statements,” said Hans-Paul Buerkner, chairman and former CEO of Boston Consulting Group. Stephen Schwarzman, the CEO of Blackstone said in a 22 January interview with Bloomberg Television that “I like President Obama as a person, and he’s well- intentioned.” At the Davos meeting of 2010 however, the very same Schwarzman said that banks could restrict lending because “their entire world is being shaken and they’re being attacked personally.” Later that year, in public, he likened Obama’s tax proposals to Hitler’s invasion of Poland.

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Schwarzman of course publicly apologized for comparing Obama to Hitler, well before the 2012 election, but Wall Street’s new game of obsequious kow towing to Obama comes with a prayer. The Herd View along Wall Street was that Obama’s first term administration was “biased against business”. His Attorney General Eric Holder had publicly vowed in 2009 to prosecute those responsible for the 2008 financial crisis, but he did nothing – no senior Wall Street executives ever faced criminal charges. This is exactly what Wall Street wants as “new regulations” from old enemy Obama.

The codeword term for this is “a more balanced” administraion, which preferably will not even publicly criticize banksters and fraudsters, this time around, but what exactly does Wall Street want?

Wall Street really did prefer the more business-friendly Mitt Romney and this was signalled by Obama’s victory stock market bounce which never materialized, as Wall Street sulked. Stocks shrunk and then flatlined as the market went into worry-only mode, with this mode extended by the Fiscal Cliff farce. However, since Obama won, the “Molotov cocktail” for US markets that was predicted by some at year’s end, has eroded like the belief that Obama will be intrinsically hostile to business throughout his second term. He may in fact have other things to do, like saving Humanity from climate change and bad weather, and he has said so.

The one-day “victory slide” of the Dow Jones industrial average, plunging 313 points, or 2.4%, to just below 13 000 was Wall Street’s way of admitting it had lost, and wanted everybody else to sulk along with The Herd. Days later, it was forgotten as the spinning roulette wheels of the New Economy wove their magic promises of instant wealth for no effort. By 22 January, the DJIA had recouped more than 6% since the victory slide, as much as it gained the whole year of 2012. Besides, strictly comparable for gauging the real degree of “fear and loathing” on Wall Street, the biggest single day loss to the DJIA following a presidential election was in 2008 when the Dow tumbled 5% after Obama won his first term. Obama is already a “house-trained tyrant”, or even a paper tiger for Wall Street.

DON’T COUNT ON OBAMA

Wall Street will however stay worry-prone through 2013. Taxes on stock market gains will rise, Volker regulatory changes may be unpalatable, the now triple-stage Fiscal Cliff may cause serious consumer and corporate pain, Obama’s trade policies against China may be business-unfriendly, not only to the Chinese, he might really slow down or hamper outsourcing – all things are possible. The Obama second term administration, more than the first, could or might include some “Wall Street friendlies” but more than ever, the USA has a One Man government exactly like any other major country in the thrall of New Politics. Obama himself will do nothing about this, it gives him stature. When or if needed, he can say he is a prisoner of the system. Never lose!

The danger is that Obama will shift into a four-year obsession with climate change and the green agenda, despite this being an already-ran, already disliked by the public, theme or meme. Obama will almost certainly issue so many executive orders that simply through statistics, several will be bad for business – and Obama won’t care. To be sure, his scope for real damage is low, which he knows and possibly does care about, because any second-term president is tempted “by greatness”, which means troublemaking.

In this case, the kow towing from Wall Street will move to higher gear. This will be shown by different coded language, of the type already used in Europe by the “business community” for more than a year. In Europe, through fear, non-politics has become the iron law. To be sure, attacks on politicians can be vituperative, wounding, even directly personal but they will only come from individuals, not corporate institutions. The media, using well-honed coded language of its own, will explain this as “an outburst” and a “personal opinion”, and quickly print or broadcast climdowns and retractions. Above all, the “corporate sector”, headed by the banks need the continuation of Europe’s political lifeline support in the shape of massive cash bailouts, either directly or channeled through already-failed national governments such as Greece or Spain. More than the USA, corporate Europe needs its One Man (and One Woman for Germany) governments to keep throwing public money at the losers, fraudsters and hopefuls, once called Captains of Industry.

STRIVINGS OF GREATNESS

This is likely the single biggest danger: One Man governments run by persons striving for a place in the history book. Formerly, they had the choice of heroic international wars, even world wars, colonial adventures, or if they badly mismanaged the greatness strivings, a home-made domestic revolution and their ouster, possibly in a bloodbath. Today they only have their deficits to play around with and shuffle, while they hand out billions to the losers, fraudsters and hopefuls of “the business community”. Written in stone, their path of constant economic decline is one-way only.

Already uniform among Europe’s one person governments, the friendliest of business-friendly myths are regularly gurgled by the great men and the great woman in their breathlessly sincere media interviews. The 2008 crisis was a massive and bad surprise; it shouldn’t have happened; but nobody in the corporate world was to blame. Although it can’t ever happen again, from now on there will be austerity and unemployment for most, and huge bailouts for the corporate world, paid for by taxpayers and by increased public debt. There really is no choice !

Wall Street in its own way acknowledges that its counterparts in Europe have better tamed and house-trained their One Person government leaders, than the US. Wall Street pundits will say how much more terrible Europe’s finances have gotten – because of socialist tyranny – than in the USA, where even Obama is showing signs of stepping back from the brink. But they will then go on to say how pragmatic and reasonable Europe’s one man and woman government have become, with almost no exceptions. Europe really is managing that crisis, my oh my! All those European one person governments needed, the Wall Street storyline goes, is a wall-to-wall bank, finance, insurance, housing and automobile industry meltdown. Thats all that is needed, along with 29 million unemployeds in Europe.

Greatness of this New Politics type soon loses it sheen, if it had it to start with. Hands-off rule by laisser-faire one person governments caressing their strivings for greatness is a curious way to “celebrate” the knowledge-based society and economy. Obama is however a great fit for this, making it very likely the kow towing from Wall Street will impress its intended victim to further inaction and heightened irrelevance.

Andrew McKillop is a former expert in policy and programming with the European Commission in Brussels. He writes and consults about the impact of oil prices on the economy and currently advises the ECOHABITAT sustainable housing and property development project near the French, Belgium and Luxemburg borders.