The real US enemy now is Wall Street, not terrorism

Business Times - 25 Sep 2008

AMERICAN television stations protect themselves against possible action by the US Federal Communications Commission, which has the right to regulate 'indecent' broadcasts. They do that through self-censorship of 'inappropriate' content to make them suitable for 'family' or daytime viewing, including through 'bleeping'. That usually happens when comedians on a television show use the 'F' word or other coarse language.

This week, US television viewers experienced quite a lot of bleeping on live TV programmes when this or that man or woman 'on the street' was asked to comment on the proposed US Treasury's US$700 billion financial rescue plan for Wall Street.

'You tell that (BLEEP) Paulson to shove his (BLEEP) plan to help those (BLEEP) in (BLEEP) Wall Street into his (BLEEP) (BLEEP),' was the response from one of the more polite interviewees.

It is a typical expression of the rage of the American people as they are being asked by Treasury Secretary Henry Paulson and US Federal Reserve chairman Ben Bernanke - through their representatives on Capitol Hill - to come to the aid of those Americans earning eight-figure salaries and owning several homes (Manhattan, Paris, Bermuda) while the average tax-payer struggles to pay his mortgage and credit card bills.

This anti-government and anti-Wall Street sentiment is reflected in public opinion polls that point not only to wide opposition to the bailout plan, but also to a sense of national depression when it comes to the current economic reality. Hence according to the American Research Group, which asked Americans whether they thought the national economy was getting better, staying the same, or getting worse, zero per cent of Americans said that the economy was getting better while 82 per cent said it was getting worse.

Mr Paulson and Mr Bernanke, testifying on their bailout plan before Congress on Tuesday, seemed to be at the receiving end of this public fury. They looked sleep-deprived and somewhat frail as they confronted lawmakers who were polite but at the same time made it clear to these two top US officials that selling their plan to the American people would be even more difficult than, say, exporting democracy to the Middle East.

When Mr Paulson tried to convince the senators that their rescue operation was 'all about the American taxpayer', there was a loud burst of laughter in the Senate hearing room. (Translation: 'Oh, please ... Who are you kidding?')

At the same time, these representatives of the American voters - the members of the more conservative Senate and the even more democratic House of Representatives - admit that while they have to respond to the pressure coming from their voters by not being seen as giving a 'blank cheque' to Mr Paulson to buy the troubled assets from financial institutions, they also recognise that they would need to approve some kind of a plan if they want to avert a total meltdown of America's financial system.

At a minimum, members of Congress want to demonstrate to their voters that they are baulking at quick action to pass the measure proposed by the administration. They want to convey the impression that they would give it a green light only after careful discussion and after getting a promise from Mr Paulson to modify some elements in the bailout plan.

The expectation on Capitol Hill is that the administration will be forced to embrace some of the elements in a counter-proposal offered by Democratic Senator Chris Dodd of Connecticut which would require the Treasury to receive an ownership stake in the companies it helps.

But neither the administration nor Congress would be able to resolve the main dilemma that the government will face as it implements its bailout plan. If the price of distressed assets that the government is going to purchase is set too low, the financial companies would have to take a major loss, and we're back at square one: a continuing credit squeeze. But if prices were to be too high, the chances that the taxpayers will get their money back - not to mention make a profit - would be close to zero.

The point is that even Americans who cannot read a spreadsheet understand that they are going to lose their US$700 billion (plus) while Wall Street will end up making more than a buck or two.

Expect therefore that economic populism is going to be the driving force in US politics in the coming years, and that the next president would be forced to operate against this backdrop. That explains why both Democrat Barack Obama and Republican John McCain are sounding these days like angry populists. Forget Islamo-Fascism. The real enemy now is Wall Street.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.


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