After the Federal Reserve engineered JPMorgan Chase’s (NYSE:JPM) takeover of beleaguered investment bank Bear Stearns (NYSE:BSC), some media outlets portrayed the act as the government bailing out Wall Street while ignoring the problems on Main Street.
“Wall Street investors couldn’t applaud enough last week when the Federal Reserve rode in and rescued investment bank Bear Stearns from bankruptcy,” Scott Mayerowitz wrote for ABC News in a March 25 story headlined “Bear Gets Billions, But What About You?” “But now, Main Street wants to know what justifies a taxpayer-backed bailout of the investment bank, especially with no congressional oversight. And, skeptics wonder, why undertake such a plan when it doesn't help the mom-and-pop store struggling down the road or the thousands of Americans who might lose their homes?”
“Main Street” and Wall Street are competing entities, according to the media. What’s good for one might even be bad for the other. It’s a theme that echoes throughout the Democratic presidential campaign. Sen. Barack Obama (D-Ill.) made the comparison five times in his March 27 speech on the economy in New York City.
The idea that the two “Streets” are dueling for attention – most recently, government attention – pervades media coverage.
On the heels of the Fed’s actions, CBS correspondent Maggie Rodriguez asked Treasury Secretary Henry Paulson why something couldn’t be orchestrated for some homeowners – suggesting the government bailed out Bear Stearns.
“Yesterday you mentioned the importance of things that can be done quickly to ease the housing crisis, but you didn’t give a deadline,” Rodriguez said on the March 18 “The Early Show.” “Wouldn’t it be worth it, given the gravity of the situation, to sit down with the agencies involved and have a cram session, like you did this weekend to bail out Bear Stearns? Isn’t it just as important to bail out homeowners in trouble as it is to bail out an investment giant in trouble?”
Rodriguez’s question suggested individuals on Main Street were ignored by the government when the Fed stepped in to help a Wall Street firm.
Despite the media’s insistence that Wall Street and “Main Street” work in opposition to each other, those who understand economics disagree. John M. Berry, who served as the former national economic correspondent for Time magazine and later as the Washington bureau manager for Forbes, explained that the country’s financial interest isn’t divided.
“What isn’t appropriate is continuing to play populist politics by pretending that the interests of Main Street and Wall Street aren’t aligned when the stability of the financial system is at stake,” Berry wrote in a March 31 column for Bloomberg.
That’s exactly what the mainstream media have been doing for years.
One America, Two Streets?
The media don’t see the two “Streets” as interdependent. One of the ways Wall Street/Main Street relationship is often characterized is that what’s good for Wall Street hurts people on Main Street.
After a solid day for stocks on Wall Street, Oct. 31, 2007, “NBC Nightly News” anchor Brian Williams treated the news as not being necessarily positive for “Main Street.”
“Now to Wall Street, which, as you know, doesn’t always like what Main Street likes, and by the end of the trading day, it was up,” Williams said.
But what is Wall Street, anyway?
“The truth is, so-called Wall Street is nothing less than America’s financial faith in the future economy – pensions, college funds, venture capital, business loans, mortgages and much more,” said Pete Sepp, vice president of the National Taxpayers Union.
But for journalists, Wall Street is a different world – one where very few people, supposedly, reside.
Even CNBC “Mad Money” anchor Jim Cramer, who made a fortune as a hedge-fund manager for Goldman Sachs, drew a dividing line in an interview with NBC “Today” co-anchor on August 10, 2007.
“Okay, let’s also understand that there are two worlds right now,” Cramer said. “I don’t care about Wall Street pain. I worked on Wall Street. Everybody’s pretty rich. They can, if they’re unhappy, handle themselves. It’s their own fault. It’s more of the 14 million people who bought homes between 2005 and 2007. They are walking away from those homes in unprecedented numbers, other than the 1930s. The Federal Reserve can change that. The Federal Reserve's done nothing. The Federal Reserve doesn't seem to care right now.”
How can Wall Street investors possibly get fair treatment when one of their own speaks out so emphatically against them?
The media also play a role in advancing class warfare by employing the Wall Street/Main Street metaphor.
“I mean, the Wall Street bonuses are up an average 14 percent this year, but for the rest of us, for Main Street, pretty hard to come by,” CNBC’s Vera Gibbons said on NBC’s December 26 “Today.”
But, a healthy Wall Street benefits Americans who invest, as well as others who gain from added jobs and economic growth. Back in July 2007, when the Dow Jones Industrial Average (DJIA) was hovering above 13,000, everyone was benefiting, not just “Wall Street tycoons.”
“But while the rich are getting richer, you may be too,” CNBC “Street Signs” host Erin Burnett explain on NBC’s July 17, 2007, “Today.” “Here’s why – more than half of Americans are invested in the market, whether through a 401(k) plan or buying stocks or mutual funds and many of those investments are surging. The Dow Jones Industrial Average is up 12 percent so far this year and if your retirement plan invested in oil, that alone is up 21 percent. It’s also worth noting that while politicians talk about ‘two Americas,’ virtually all Americans are seeing wages rise and unemployment is at an historic low.”
And Main Street America sees tangible results from investment.
“Wall Street provides the financing to allow people to take risk,” said Dr. Gary Wolfram, an economics professor at Hillsdale College and a BMI adviser. “It allows for the financing for people to start a new business, to be innovative. I mean, if you didn’t have Wall Street, you wouldn’t have a computer sitting on your desk.”
In addition to innovation, investment grows the economy and creates jobs, he explained.
“What does Wall Street do?” Wolfram continued. “It is actually the place that takes everybody’s little amounts of money and combines it to get it out to people who are starting businesses, to people who have existing business, to people expanding businesses, creating innovation. A healthy Wall Street makes it so that you have food on your table. I mean if there were no Wall Street, you wouldn’t have ConAgra. You probably wouldn’t have half the products that you have today if you didn’t have Wall Street.”
New Candidates, Same Old Rhetoric
What probably won’t come as much of a surprise to many is that politicians are picking up on these voices in media who have repeatedly played the class-envy card.
A usual knee-jerk reaction heard from voices in the media is a plea for some type of government action.
“[T]he Dow at 13,000 – Wall Street’s up, but what about Main Street?” Chris Matthews asked on the April 29, 2007 “The Chris Matthews Show.” “Will the Democrats do something about the skyrocketing gap between the super-rich and everyone else?”
With the economy now the issue du jour, both Democratic presidential candidates have tried to answer the question Matthews asked. Sens. Barack Obama (Ill.) and Hillary Clinton (N.Y.) have incorporated the “Main Street/Wall Street” phraseology into their campaign speeches.
In a speech at Wake Technical Community College in Raleigh, N.C. on March 27, Clinton portrayed tax cuts as “wrong-headed government policy,” since she said they sometimes benefit Wall Street at the expense of Main Street. Clinton used a comparison of Americans “overcoming” these policies to the Wright Brothers’ inventing the airplane in North Carolina to illustrate her class warfare talking point.
“[T]he lesson of the Wright Brothers is that Americans can overcome any obstacle including wrong-headed government policies,” Clinton said. “Like, for example, tax breaks for oil companies already reaping record-setting profits, giveaways for drug companies who don’t have to negotiate with Medicare for lower prices, incentives in our tax code for companies to ship jobs overseas, no-bid contracts for companies like Halliburton, tax cuts for billionaires, free rides for predatory lenders and a blind eye for firms on Wall Street at the expense of homeowners on Main Street.”
However, demonizing tax cuts for Wall Street firms doesn’t equate to bettering the American people, as taxpayer advocate Pete Sepp explained.
“Wall Street and Main Street are no longer on opposite sides of town, if they ever were in the first place,” said Sepp, Vice President for Communications for the National Taxpayers Union. “Mutual funds, IRAs, 401(k)s, and other products from ‘Wall Street’ give more than 50 million American households a shot at the ‘American Dream’ – a number that is growing every day, thanks in part to the 2003 tax cuts on capital gains and dividends.”
Sepp also pointed out that it’s the United States’ high corporate taxes that discourage companies from keeping jobs here.
“Politicians complain about ‘tax breaks for oil companies’ when what they really want to do is deny a tax credit to oil that most other industries can take,” Sepp continued. “They whine about tax code provisions that ‘move jobs overseas,’ saying nothing about the fact that America has the second-highest corporate tax rate in the industrialized world.”
Obama pitted the interests of Wall Street and Main Street against one another in a March 27 speech at Cooper Union in New York – spouting a populist line that anything that “favors” Wall Street hurts people on Main Street. He even referred to these policies causing the Great Depression.
“[W]e let the special interests put their thumbs on the economic scales,” Obama said. “The results have been a distorted market that creates bubbles instead of steady, sustainable growth – a market that favors Wall Street over Main Street, but ends up hurting both. Nor is this trend new. The concentrations of economic power and the failures of political system to protect the American economy and American consumers from its worst excesses have been a staple of our past, most famously in the 1920s when such excesses ultimately plunged the country into the Great Depression.”
The populist “Main Street” message can backfire, according to CNBC’s Larry Kudlow. Kudlow showed how candidates with an anti-business, anti-Wall Street message wind up losing in elections.
“Anti-business class warfare doesn’t work in the United States. John Kerry tried this tack in 2004,” Kudlow wrote on the National Review Online’s “The Corner” on February 19. “He lost. Ditto for Al Gore in 2000. Ditto for Michael Dukakis in ’88, Walter Mondale in ’84, and Jimmy Carter in ’80. It looks like Hill-Bama [Hillary Clinton and Barack Obama] is making the same mistake all over again in 2008.”
According to Kudlow, what is lost by the two candidates with the tone of their campaign is the importance of businesses to the American voter.
“There are a lot of reasons why the anti-business message doesn’t work,” Kudlow wrote. “One important reason is that 138 million Americans work for these corporations. Their livelihoods depend on businesses. 138 million is a big number. Think of it.”