Top of the News: So do we reach a tipping point when the popular anger over AIG, and more widely against out-of-touch big business, negatively affects the capital markets? If so, we’re far from it: the stock market has actually had quite a run even as Americans have gotten madder and madder over executive excess. Investment bankers probably poll lower in public opinion than even, say, financial columnists.
Yet this was an issue that dogged FDR during the New Deal: How much could he push back against big business without it hurting the economy? “We had to struggle with the old enemies of peace: business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering,” Roosevelt said in 1936. “They had begun to consider the government of the United States as a mere appendage to their own affairs. We know now that government by organized money is just as dangerous as government by organized mob.” Sound familiar? He famously added, “They are unanimous in their hate for me, and I welcome their hatred.” Yet FDR in reality often pulled his punches.
Now the question will be what kind of re-regulation emerges from the business abuses of recent years? Ben Bernanke is addressing some of this today. Too much and business remains in the tank. Indeed, too much regulation and taxation risks capital flight overseas. Yet most business wants rules of the road that avoid future AIGs as much as any populist. Fair, transparent, predictable — such regulation saw the American economy soar for decades. Despite some cries of “socialism,” the reality is that the pragmatic Obama administration is anything but. Tim Geithner’s biggest problem is that he’s too close to The Street.
For now, the capital markets are trying to cope with the worst meltdown since the 1930s. AIG stalkers are the least of the troubles. But the regulatory framework that emerges from the disaster will have to be better than Sarbanes-Oxley, the failed attempt to clean up from the Enron bubble. And average Americans, who have seen their nest eggs destroyed by corporate mismanagement, will be watching, too.
The Back Story: Layoff notices have started going out at Boeing, the first of thousands that could be felt in the Puget Sound region. I wonder if more bad news is on the way. Consider the latest International Monetary Fund projections that global growth will contract by 0.5 percent in 2009, the first contraction in 60 years. Some of Boeing’s prime customers overseas are hurting even more than America.
Today’s Econ Haiku:
A good time to buy?
As mortgages hit bottom
The Fed sure hopes so