What do Wall Street and Congress have in common? Great power, surely, and a strong interest in money. They also share a rung at the bottom of the ladder when it comes to public trust.
In the Pew Research Center polling that made everyone's news this week, government fared poorly. But the only part of government to be at its historic low point was Congress. Only one American in five professed faith in Congress' ability to do the right thing all or most of the time.
Yet in the same poll, Pew found more than three in five wanted Congress to do something to rein in Wall Street and the excesses that led to the mortgage meltdown and the recession of 2008-2009.
Americans have an instinctive distaste for elites and power concentrations. Always have. Yes, most of us go on abiding by the laws Congress makes and relying on the financial machinery the big banks dominate. But we tend to be wary of both, even in the best of times. And right now, with unemployment just below double digits, we are all in a less-forgiving mood.
To see what's different about our current disillusionment, let's break it into three parts. First, you have the conventional revulsion at classic scandals and their perpetrators. This is the category for financiers such as Bernie Madoff, the Ponzi scheme billionaire, and powerful members of Congress such as Duke Cunningham, the subcommittee chairman who wrote out a price list for bribes. Both men are now in jail.
Second, you have disillusioning effect of procedural maneuvers and strategies that smack of deceit. It is off-putting to many Americans to see House members vote both for and against a big bill on the same afternoon, or to see one senator hold up bills or nominations for utterly unrelated reasons. The average American does not understand how Goldman Sachs can sell one investment that bets on home mortgage loans and another that bets against them (especially if the portfolio of assets is amassed by someone who wants them to crash so he can make a billion dollars).
Much of this is usually masked to the world by insider terminology, abbreviations and acronyms. Capitol Hill speaks of the "secret hold" and "deem and pass" while Wall Street speaks of credit default swaps (CDS) and collateralized debt obligations (CDOs) and naked short selling.
Actually, the denizens of these worlds know perfectly well their lingo leaves people behind. That is largely the idea. There may be nothing wrong with some of these practices and procedures, or there may be very little about them that could stand the light of day. The point is that the rest of us can't tell one way or the other. And right now, after the bailouts and the fallout, we're less inclined to sit still for that.
But there is a third category of disconnect in the current atmosphere, and it may be the most important.
What really disturbs Americans right now is a growing sense that what goes on — on the Hill or on the Street — is not about the general citizenry or the general economy. Both institutions increasingly appear to be consumed with "trading on their own account."
Too much of what goes on in Congress is about posturing for the next election (or committee chair or leadership post). The parties each weigh their moves with an eye on the next election, not just in the final months before November in an even-numbered year but all the time. The campaign never stops, and neither does the fundraising to fuel it.
Similarly, too much of what goes on in the stock and bond markets is about constructing "plays" and "trades" to make money without regard to underlying economic values or real-world effects. Billions are invested not to build or buy things but to play the dynamics of the market, buying and selling contracts to buy and sell in the future or to hedge against bets yet to be taken. Think of a poker player who's less interested in his cards than he is in the other players' plays. The language and psychology of the casino has always been part of the financial world. Lately, it seems to be the part that matters most. And that is troubling for public at large.
Sure, there's always been a huge element of self-dealing, both in politics and high finance. It's in the nature of the beast, and has been in earlier eras, not to mention in other countries and different systems. But even if you know that and accept it, the suspicion remains. And the questions arise. Have we passed the tipping point? Have these elements finally supplanted the original intent of the institutions in question? And aren't we supposed to be better than that?
No wonder our trust in both the national legislature and the biggest investment firms is at such an ebb.