Misdirected Outrage in WSJ

In a recent Wall St. Journal Op-Ed, writer James Grant asks where is the public outcry in response to the recent financial scandals and crises. The headline/subhead of the piece is:
Why No Outrage?
Through history, outrageous financial behavior has been met with outrage. But today Wall Street's damaging recklessness has been met with near-silence, from a too-tolerant populace, argues James Grant
{Note: The article is free online today but it may not be in the future, so I'll quote heavily from it.}

In this long and rambling piece -- so rambling, in fact, that it is very difficult to follow his arguments -- James Grant remembers a time when prominent Populists were very vocal protesters:
"Raise less corn and more hell," Mary Elizabeth Lease harangued Kansas farmers during America's Populist era, but no such voice cries out today. America's 21st-century financial victims make no protest against the Federal Reserve's policy of showering dollars on the people who would seem to need them least.
He describes the creation of an "activist central banking" system, and attributes its activities to many of the problems we see today. However, he avoids making a distinction between the Federal Reserve and private banks/Wall St., and it is difficult to discern which (or both?) is his target in the following statement:
Have the stewards of other people's money not made a hash of high finance? Did they not enrich themselves in boom times, only to pass the cup to us, the taxpayers, in the bust? Where is the people's wrath?
Perhaps he is targeting both, or more specifically the relationship between them, and the fact that bad decisions by Wall St. are secured by the Fed using our tax dollars.

He then makes a very interesting point when he posits that the reason there is little outcry is because the economic/political system that the "lefties" (his word) advocated has come to pass. (Presumably, that means there's nothing left to complain about?)
I have another theory, and that is that the old populists actually won. This is their financial system. They had demanded paper money, federally insured bank deposits and a heavy governmental hand in the distribution of credit, and now they have them. The Populist Party might have lost the elections in the hard times of the 1890s. But it won the future. [bold added]
He goes on to depict the ever more invasive government intrusion in the free markets, and how this is a realization of the lefties' goals. At this point, I believe I put my finger where Grant is coming from.
Thus, the Wall Street of the Morgans and the Astors and the bloated bondholders is today an institution of the mixed economy. It is hand-in-glove with the government, while the government is, of course -- in theory -- by and for the people. But that does not quite explain the lack of popular anger at the well-paid people {"greedy capitalists?" -ed.} who seem not to be very good at their jobs. [bold added]
Here it is in black and white. Grant accepts that Wall Street is in bed with government and that things are not working at all. But instead of identifying the fundamental situation itself as the problem, he accepts the role of government in the economy, and wonders instead why people and politicians aren't getting angry with the bad guys on Wall Street who take home huge bonuses.

After outlining the Fed's role in artificially creating an environment where "Risk, the bankers and brokers and professional investors decided, was yesteryear's problem," he chooses as his target of ire, not the very nature (and immorality) of government intrusion into the free markets, but "the gluttonous ways of Wall Street" running rampant under the noses of "the government's snoozing watchdogs."

After describing all the ways in which our tragically mixed economy was exactly what the Left wanted, Grant's answer for who to blame is Wall Street, and apparently that they were irresponsible in playing by the terms set out by the Fed.

In addition to blaming Wall Street, Grant blames the government, but not for the logical reason of too much meddling. His complaint is that it didn't go far enough in it's intrusions! He doesn't come right out and say it -- and admittedly, he does accurately target the terrible judgment of many who relied on the govt. safety net to assuage all risk -- but it seems that his implication is that we need more government oversight, not less. I'm at a loss to explain how he arrived at that conclusion, and Grant does nothing to elucidate it.

After more rambling arguments that flip between condemnation of big business, of government intrusion, and of a docile populace, he ends on this note:
Huey Long... once compared John D. Rockefeller to the fat guy who ruins a good barbecue by taking too much. Wall Street habitually takes too much. It would not be so bad if the inevitable bout of indigestion were its alone to bear. The trouble is that, in a world so heavily leveraged as this one, we all get a stomach ache. Not that anyone seems to be complaining this election season. [bold added]
Here, at the end, I think he betrays his core argument. I can only conclude that the rest up to that point was just a mess of dissembling statements meant to dance around the issue. Wall Street is too greedy, he says, implying that this is the main cause of the problems. This would be OK, according to Grant, if the resulting "indigestion" only impacted Wall Street, but the trouble comes in when "the people" are affected.

This last paragraph exposes Grant as a total hack. He identifies Wall Street as some disembodied entity that is completely separate from the private funds of all of it's investors, and then blames it for being greedy. How could "Wall Street" alone bear the brunt of any downturn? It makes no sense. And he mentions J. D. Rockefeller specifically to call upon the popular perception of the Robber Barons, to make his point about greed without having to actually say it.

Then he forgets to mention the Fed's role in the mess and instead says that because Wall Street's investments are more heavily leveraged (risky) than they should be, we all pay the price. He blatantly ignores his own previous arguments where he described how the Fed's safety net made it possible to pretend risk didn't exist in the first place.

For a refreshing antidote to the mind-numbing fog of Grant's arguments, I recommend reading Yaron Brook's Op-Ed in Forbes Magazine.

After delineating all the factors leading up to the recent mortgage/banking crisis and highlighting some of the same points raised by Mr. Grant -- specifically that the implied government safety net of the FDIC and other govt. institutions engineered a false sense of security that Wall Street stupidly acted upon -- Yaron Brook ends with a very different conclusion:
Given that our government was behind the wheel, influencing every aspect of the mortgage crisis, it is absurd to call today's situation the result of insufficient regulation.

We do not need more regulation or economic "steering"--laws or bureaucrats dictating to financiers and investors the kind of innovation they may or may not engage in. If that were the solution to economic problems, then Hugo Chavez would preside over the world's healthiest economy in Venezuela. What we need to do is remove the government's power to coerce, bribe, reward and bail out irrational decisions. The unfree market has failed. It's time for a truly free market.
This is the type of analysis we need in the face of the current problems, not some whining about a lack of popular outrage or yearning for less greed and more regulation. Shame on the Wall Street Journal for not being more discerning in its choice of columnists.

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