Wall Street vs. Main Street - Faulty conceptualization
The "bailout" is being framed as "Wall Street versus Main Street". Bush, Paulson, Obama and McCain, all say this package is not for Wall Street, but really for Main Street. Detractors say they don't want Main Street bailing out Wall Street. The battle of the two streets is the battle of class-warfare.
However, our problems were not caused by the rich to be paid for by the middle class. Primarily, this is a government-caused problem: caused by messing with the economy, distorting the price-mechanism, and the risk-tolerance of market-players. Even secondarily, it is not the rich (Wall Street) who took advantage of this (or were led astray); nor was it the middle class (Main Street) who were left out of the craziness. No, that is faulty categorization.
The fallen: People who took advantage of, and were misled by, government actions came from both places: on the one hand they were people who were buying more home than they would have if the government had not engineered artificially low interest rates and artificially low risk-premiums. And, then there were investors who bought into the same "reality".
The responsible: Meanwhile, people who stayed away from the fray also came from both Wall Street and Main Street. Many banks kept their distance from the madness, and some investors started selling Fannie and Freddie stock when those two began delving into sub-prime paper. On Main street too, many people did not use their homes as piggy-banks; and even today one in three U.S. homeowners own their homes 100%, with zero mortgage debt. Even among those who can get loans (incomes over $150,000 a year), 20% do not carry mortgages.
The tab: It is also false to say that Main street picks up the tab. The rich pay taxes too!
In summary: The Main Street vs. Wall Street classification is misleading. It would be clearer to use a different distinction.
Bonus: Here's a transcript of an interview with John Stumpf, CEO of Wells Fargo, a bank that has not made the news because it is safe and sound. It's boring today, and was not sexy yesterday. These are the types of people that make America great.
However, our problems were not caused by the rich to be paid for by the middle class. Primarily, this is a government-caused problem: caused by messing with the economy, distorting the price-mechanism, and the risk-tolerance of market-players. Even secondarily, it is not the rich (Wall Street) who took advantage of this (or were led astray); nor was it the middle class (Main Street) who were left out of the craziness. No, that is faulty categorization.
The fallen: People who took advantage of, and were misled by, government actions came from both places: on the one hand they were people who were buying more home than they would have if the government had not engineered artificially low interest rates and artificially low risk-premiums. And, then there were investors who bought into the same "reality".
The responsible: Meanwhile, people who stayed away from the fray also came from both Wall Street and Main Street. Many banks kept their distance from the madness, and some investors started selling Fannie and Freddie stock when those two began delving into sub-prime paper. On Main street too, many people did not use their homes as piggy-banks; and even today one in three U.S. homeowners own their homes 100%, with zero mortgage debt. Even among those who can get loans (incomes over $150,000 a year), 20% do not carry mortgages.
The tab: It is also false to say that Main street picks up the tab. The rich pay taxes too!
In summary: The Main Street vs. Wall Street classification is misleading. It would be clearer to use a different distinction.
Bonus: Here's a transcript of an interview with John Stumpf, CEO of Wells Fargo, a bank that has not made the news because it is safe and sound. It's boring today, and was not sexy yesterday. These are the types of people that make America great.
Labels: ECONOMY
posted by SN at
5:46 PM
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