A Point of View: Wall St back in the firing line
- 17 February 2012
- From the section Magazine
Criticism is being levied at bankers in the US, where opinion does not divide neatly along party lines. But it is mild compared with some previous attacks, such as the ferocious and sustained one unleashed by Franklin D Roosevelt, writes David Cannadine.
It is not surprising that the criticism of bankers that's occurring in Britain is also taking place on the other side of the Atlantic.
There may be no exact American equivalent to depriving the former boss of the Royal Bank of Scotland of his knighthood - or to his successor feeling compelled by the weight of public opinion to give up his bonus - but the signs of public hostility to American bankers, those Masters of the Universe, whom Tom Wolfe earlier denounced in The Bonfire of the Vanities, are also widespread, and may even be intensifying.
The Occupy Wall Street movement has been in existence for several months, and although there seems little likelihood that it's going to overthrow the international capitalist system, it's certainly bothered a lot of people in New York and Washington.
In his recent State of the Union message, President Barack Obama made it plain that rich people should not be paying less taxes, proportionately, than poorer people, as at present they are. And while some Republicans immediately denounced his words as an incitement to class war, both Newt Gingrich and Rick Santorum have recently joined in, attacking the bankers rather than defending them.
As this suggests, the issue of bankers and bonuses doesn't divide neatly along party lines. President Obama may insist that he speaks for ordinary citizens when he opines that the rich need to be reined in.
But when he assembled his treasury team after his election in November 2008, many of them had close connections with Wall Street, and he's been much criticized for this in some quarters ever since. But this issue is no more straightforward in the case of the Republicans.
Since the 1980s, one section of the party has been determined to implement a political agenda that's favourable to the rich, especially in regard to tax cuts for those on higher incomes and the deregulation of the financial system. It's beneficial, they argue, to the economy as a whole.
But the Republicans also claim to speak for ordinary Americans, many of whom are supporters of the Tea Party movement, and who aren't millionaires and have no prospect of ever becoming so. And these people wouldn't necessarily be in favour of a Republican Party that's preoccupied with making the world a better and more secure place for those who are already very wealthy.
There's more common ground between the Tea Party and the Occupy Wall Street movements than you might think - a kind of populist revulsion at what seems to be the irresponsible excesses of the American financial sector and at the unwillingness or inability of the lawmakers in Washington to do enough about it.
Those who defend the bankers and their bonuses denounce their critics for practising "the politics of envy". Those who attack the bankers and their bonuses retaliate by denouncing them for practising "the politics of greed". And somewhere in between is Barack Obama, who is trying to get a hearing for what he calls, "the politics of fairness".
Meanwhile, American bankers, like their British counterparts, feel increasingly hard done by. Many of them are losing their jobs as their bonuses are cut and as more regulation will soon be coming into force with the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which President Obama signed into law in 2010 - and which one of the Republican candidates, Mitt Romney, has pledged to repeal.
As in Britain, so in America, much of the current discussion of these vexed and contentious issues seems over-simplified and under-informed. Those who criticise an allegedly monolithic group called "the bankers" show little awareness that in terms of what they actually do, banking is a very varied and diverse profession, with salaries that are correspondingly varied and diverse.
Those who seek to defend "the bankers" seem very bad at explaining just what it is they do, why they do it, how they do it, and why they are paid what they are for doing it. And while some bankers seem to be genuinely shocked, outraged or upset by what they see as the current wave of hostile criticism and negative stereotyping, they should draw comfort from the fact that they're working now in the 2010s and not in the 1930s when President Franklin Roosevelt's denunciation of bankers and his determined regulation of their activities make Barack Obama's words and actions seem mild and charitable by comparison.
Like his earlier presidential cousin Theodore, Franklin D Roosevelt felt a strong patrician disdain for big business and upstart wealth. This was partly because the Roosevelt clan was never very rich but it was also because in terms of their lineage and their lands, they were about as close to being aristocracy as it's possible to get in a country, which came into being by proclaiming that all men were created equal.
Theodore Roosevelt's hostility to the excessive accumulation of money took the form of a Progressive-Era crusade against giant corporations, such as Standard Oil, which was owned by the prodigiously rich Rockefeller family, and he denounced this new breed of multi-millionaires as "malefactors of great wealth".
But this was mild-mannered compared with the sustained and ferocious onslaught that Franklin Roosevelt unleashed against American bankers during the era of the New Deal. When campaigning for the presidency in the autumn of 1932, he attacked them as "financial titans", who had made too much money in the boom years of the 1920s, and who also bore responsibility for the Wall Street crash of 1929 and the ensuing Great Depression.
In his first inaugural address, FDR excoriated the bankers as "unscrupulous money changers", he called for "an end to speculation with other people's money", and one of the earliest pieces of New Deal legislation was the Glass-Steagall Act, which separated commercial banking from investment banking (and the repeal of which, in 1999, is widely regarded as one of the main causes of America's present economic woes).
Roosevelt also went after particular bankers and sought to make examples of them, encouraging the Internal Revenue Service to prosecute them for tax evasion.
One such figure whom FDR went after was Andrew W Mellon, who was not only an extremely rich banker, but had also served as Secretary of the US Treasury during the 1920s and on into the Great Depression. Mellon was thus a doubly marked man, his closing years were darkened by accusations that he had committed tax fraud on an epic scale and his belated vindication only came after his death.
Andrew Mellon's relatives never forgave Roosevelt for inflicting such pain and humiliation on him, yet the patrician president revelled in his role as a class warrior on the side of ordinary people. When seeking re-election in 1936, he again denounced "business and financial monopoly, speculation [and] reckless banking". "I should like it to be said of my first administration," he thundered, "that in it the forces of selfishness and lust for power met their match. I should like it to be said of my second administration that in it these forces met their master."
Roosevelt duly won the 1936 election by a landslide, carrying virtually every state, but hubris was soon followed by nemesis. He tried to pack the Supreme Court so it would deliver more favourable judgements to the New Deal, but failed. And after showing some fragile signs of recovery, the American economy turned down again in 1937, in what the president's critics delighted to call the "Roosevelt recession".
If FDR had retired in 1940, he wouldn't rank as the greatest American president of the 20th Century - only during his third, unprecedented term did he achieve that unassailable position and acquire a corresponding reputation as a global statesman.
But that's not been an option for any of his successors because a constitutional amendment passed in 1951 prevents any president from being elected more than twice. Yet as with FDR, so with subsequent presidents who were re-elected, their second terms have often been less successful than their first four years in office, as in the case of Nixon, Reagan, Clinton and George W Bush.
If Barack Obama does get re-elected this November, these precedents suggest his second term may be even harder going than his first. But in becoming the first black person to be elected to the White House, Obama has already demonstrated an extraordinary capacity to disregard precedents, and if he's re-elected this autumn, he may yet surprise us all again. He may even surprise "the bankers".