SEC-Goldman Sachs Row: The Rising Populist Tide Against Big Government

Professor Arnold Kling writes,

``perhaps it is not so crucial to bolster a financial sector that was misallocating capital or to bolster a state and local government sector that has been captured by unions. Perhaps these heroic efforts undertaken in the name of saving the economy only served to reward the looting classes. Perhaps we have arrived at a point in this country where looting is the most rewarding economic activity. In that case, it will not take many years before the wealth available to loot starts to shrink." (emphasis added)

He scorns the transformation to cronyism, which we totally agree. And that's why I see the latest Goldman controversy as part of the ploy to camouflage the "looting classes".

I guess some charts of Pew Research captures prevailing public sentiment.

From Pew Research, (bold highlights mine)

``By almost every conceivable measure Americans are less positive and more critical of government these days. A new Pew Research Center survey finds a perfect storm of conditions associated with distrust of government -- a dismal economy, an unhappy public, bitter partisan-based backlash, and epic discontent with Congress and elected officials.

``Rather than an activist government to deal with the nation's top problems, the public now wants government reformed and growing numbers want its power curtailed. With the exception of greater regulation of major financial institutions, there is less of an appetite for government solutions to the nation's problems -- including more government control over the economy -- than there was when Barack Obama first took office.

``The public's hostility toward government seems likely to be an important election issue favoring the Republicans this fall. However, the Democrats can take some solace in the fact that neither party can be confident that they have the advantage among such a disillusioned electorate. Favorable ratings for both major parties, as well as for Congress, have reached record lows while opposition to congressional incumbents, already approaching an all-time high, continues to climb.

``The Tea Party movement, which has a small but fervent anti-government constituency, could be a wild card in this election. On one hand, its sympathizers are highly energized and inclined to vote Republican this fall. On the other, many Republicans and Republican-leaning independents say the Tea Party represents their point of view better than does the GOP."

In contrast to those who see and think in terms of their political party lines, the polls suggest that there is ballooning discontent about bi-partisan polity.

And it's why perhaps both the Democratic Party and the Republican Party have felt the backlash from the public and thereby has seen their approval ratings plummet, which has mostly been a reflection of the performance of the US congress.

And it is also why the Tea Party has spontaneously emerged.

Yet some would stubbornly argue that more government activism is likely the answer. For instance more regulation in the financial sphere. This camp never seem to realize that in politics, what you see isn't what you get.

As Heritage's Conn Carroll comments on the proposed financial reform bill, ``So whenever Sen. Chris Dodd (D-CT) says his Wall Street Bailout Bill "would have prevented that kind of events from happening" he needs to explain how. If anything, the Dodd plan will only make future Wall Street bailouts more likely and more costly while also stifling consumer choice." (emphasis added)

This only goes to show that the proposed "new" regulatory reforms are being shaped to even benefit MORE (and not less) the looting class!

Not to mention that the controversial John Paulson who helped inspired the Goldman brouhaha, has been a generous political contributor.

According to Ben Smith of the Politico, ``Though many hedge fund managers lean Democratic, Paulson has split his giving, offering maximum six-figure contributions both the the Democratic Senatorial Campaign Committee and to the Republican National Committee. Paulson, ranked 45 on Forbes' list of America's richest individuals, made maximum contributions to the presidential campaigns of Mitt Romney, John McCain, and Rudy Giuliani in 2008, but has also given to key Democratic senators for the finance industry, including Chris Dodd and Max Baucus.

``Paulson hasn't given directly to Schumer, though he maxed out to Schumer's committee. But he did host a fundraiser for the senior New York senator earlier this month, describing him in the invitation as "one of the few members of Congress that has consistently supported the hedge fund industry." (bold emphasis mine)

And all these (lobby groups, contributions, biased laws, regulatory capture etc...) seemingly add to the reasons on why the public's attitude on politicians seems to have tipped over. Instead of big government, which they had earlier hoped to work, they now seem prefer "smaller" government.

Again from Pew, ``Despite the public's negative attitudes toward large corporations, most Americans (58%) say that "the government has gone too far in regulating business and interfering with the free enterprise system." This is about the same percentage that agreed with this statement in October 1997 (56%)."

The point is that the polls suggest that there seems to be a growing public recognition that the previous "big government" or "activist government" experiment has noticeably been a failure, from which is being manifested in politics, as shown in the intratrade.com prediction markets chart courtesy of Bespoke Invest.

And this gives even more motivation for the ruling political class to use the Goldman caper as a likely prop as the "fall guy" role for political ends.

We just don't oversimplistically regulate cartels out of existence, not when the cartel itself is lead by the government via the Federal Reserve.

To quote Dr. Antony Mueller, "There can be no honesty in a dishonest monetary system".