By Dennis Kelleher (this op-ed originally appeared in The Hill)
America’s 2020 choices are similar to those it faced in the 1930s. Then, over Wall Street bankers’ fierce and short-sighted opposition, Americans chose Franklin Delano Roosevelt, who saved capitalism from itself. Then, as now, Wall Street’s greed, recklessness and pervasive illegal activities caused a financial and economic catastrophe that sparked widespread disillusionment and fueled popular anti-capitalist movements.
Then, it took a tough and far-sighted president, FDR, to blunt the movement for more extreme alternatives by fixing the broken laissez-faire crony capitalism practiced by Wall Street with a democratic capitalism. That’s what saved the markets: transparency, the rule of law, significant regulation and public accountability. Those were structural, but not actually radical, changes.
The result was a banking system that served society by protecting people’s savings and propelling economic growth, jobs and prosperity by funding America’s entrepreneurs and businesses. That, in turn, built the largest middle class in history.
Now, almost a century later, much of that has changed. The pillars of democratic capitalism have been dramatically weakened and anything-goes crony capitalism has returned with Wall Street’s gigantic banks again in the lead, and the country again suffering and disillusioned.
Remarkably, Wall Street seems to think it’s invincible, no doubt emboldened by Trump’s unbridled promotion of all things Wall Street and its miraculous record of having dodged so many well-deserved bullets: from causing the 2008 crash and getting trillions of dollars in bailouts to continuing a shocking crime spreeto now once again pocketing record bonuses.
That has blinded Wall Street to the coming political storm, as captured in a recent article entitled “Warren has a plan for Wall Street and Wall Street isn’t panicking.” White’s point is that some on Wall Street are beginning to think Sen. Elizabeth Warren (D-Mass.) might not be so bad as president, although that was mostly as compared to a Bernie Sanders presidency.
That view, however, is way too narrow and fails to reflect the many reasons Wall Streeters should hope Warren or someone with similar knowledge, experience and plans wins in 2020. Wins, that is, before their luck runs out and they finally get what they deserve from decades of irresponsible risk-taking, unjustified lending, reckless trading and massive illegal conduct.
First, Warren is, as she has repeatedly made clear (and as the Politico article noted), a “capitalist to [her] bones” and a “believer in free markets.” As Axios’ Felix Salmon insightfully wrote about here, she deeply understands the importance of markets to broad-based Main Street prosperity and the ability of everyone to achieve the American Dream.
That’s not a uniformly held view in America today. As polls show, many Americans have lost or are losing faith in capitalism and markets, some seeing them as irredeemable. That shouldn’t be a surprise to anyone, given that capitalism as practiced in the U.S. simply isn’t working for most Americans.
It’s indisputable that capitalism today is mostly enriching the very, very few already rich at the expense of the rest of the country. In terms of wealth inequality, just three men own as much wealth as the bottom 50 percent of all Americans, and the richest 5 percent of Americans own more than 67 percent of all Americans. In terms of income inequality, the top 0.1 percent takes in over 188 times the income of the entire bottom 90 percent.
That’s why believing in capitalism, even if you recognize its deep failures and want to fix them, is too much for some Americans. Because at least some of those disillusioned people may vote in the primaries, that’s a problem for candidates who want to fix capitalism rather than get rid of it. That’s a serious threat to Wall Street.
Second, Warren is incredibly supportive of banking and finance and deeply understands its importance to America’s families, workers, communities and global standing. On top of that, she appreciates and recognizes the value of many who work in finance and their knowledge and experience.
That’s not just talk; she proved it when she planned and launched the Consumer Financial Protection Bureau. The CFPB is a good illustration of what she’ll do as president: reach out to and include all stakeholders (including industry) in planning policy; listen very carefully and try to find common ground whenever possible; and include those with expertise and experience in the staffing and execution. For the CFPB, she hired an eclectic mix of seasoned and sophisticated finance, business, political and consumer protection professionals.
Third, too many who work in Wall Street’s giant financial firms only interact with people who see the world just as they do. Consequently, they are out of touch with the rest of the country and utterly ignorant of the crushing struggles of America’s families who work harder and harder but get less and less year-after-year. The results, according to Federal Reserve studies, are that 90 percent of Americans are significantly worse off economically than they were in 2007 and almost 40 percent of Americans would struggle to cover an unexpected $400 expense.
As in the 1930s, those depressing economic realities are creating deep anxiety and insecurity at kitchen tables across America. That is fueling political, social and cultural discontent throughout the country, all of which will be the kindling for much more radical changes if something isn’t done to reverse these trends.
That’s why, if Wall Streeters had an ounce of self-enlightenment, they would see that their self-interest is in choosing a Warren or Warren-like presidency. Wall Street should be looking for a candidate who is going to most responsibly, but concretely and meaningfully, respond to the political moment and make the changes that are being demanded by – and deserved by — so many Americans who have been left behind.
If the next president, like Trump, is another sycophant to Wall Street who makes mostly cosmetic changes to our broken financial system, that would just put a temporary plug into the boiling cauldron of America. That, in turn, would only delay the reckoning. Social and political pressure will continue to grow until the price paid by Wall Street and the 1 percent is much, much greater and more damaging to the entire country.
Thus the choice is not, as an anonymous Wall Street wag has said, “like preferring to be stabbed by a steak knife instead of a bread knife.” It is also not about picking a traditional, middle-of-the-road “Wall Street friendly” Democratic candidate, as Tory Newmyer recently reported in a piece entitled “Wall Street is already voting with its wallet – against Elizabeth Warren.”
The 2020 choice is between trying to preserve the current predatory, anything-goes, anti-democratic, crony capitalism as practiced by Wall Street today, and restoring democratic capitalism. That’s the system America needs: One where finance supports the productive economy that benefits the many and once again fuels the kind of economic growth that builds a vibrant middle class and broad-based prosperity.
As in the 1930s with FDR, that will require choosing a deeply experienced candidate who understands finance, has a record of standing up to its powerful army of lobbyists and allies and who has concrete plans for structural changes that will result in meaningfully improving the economic circumstances for all hardworking Americans.
Dennis Kelleher is president and CEO of Better Markets, a nonprofit organization that advocates for enhanced financial regulation, oversight and accountability.