The Party of Wall Street

I keep holding my breath for the media to chuck the conventional wisdom. I'm now a dark navy blue.......

The Democrats' narrative about the financial crisis of 2008 (and the justification for financial reform) goes like this: Investment bankers, typified by Goldman Sachs, manipulated markets, bamboozled investors, and in their greed, managed to bring the entire economy to its knees. The solution is more strenuous government regulation. Republicans, who are beholden to Wall Street, are blocking reform.

The Democrats excel at presenting legislative tableaux with predigested morals: Stern Democratic lawmaker grills slippery Wall Street executive. Democrats for the people; Republicans for the fat cats.

Do people really buy this anymore? Everyone I know who works on Wall Street is a Democrat. Anecdotes are not evidence, but consider this: According to the Center for Responsive Politics, Democrats received $11.3 million in contributions from hedge funds in 2008. Republicans got $5.9 million. Some critics of the Dodd bill note that it would give broad discretion to the FDIC and a new regulator to decide which firms would be bailed out and which would not. That isn't so much preventing another crisis as institutionalizing "too big to fail." The moral hazard problem -- i.e., encouraging risky practices with the implicit or explicit promise of a bailout -- remains.

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