Washington to Wall Street: “Meet your new shareholders!”
If the last seven days of the “Washington-Wall Street Showdown” was a boxing match, the referee would have put an end to it by last weekend. Instead, the Street’s image is on the ropes but no one in Washington is anywhere near done taking another swing.
In seven days we’ve gone from an angry President Obama calling for bankers to show “restraint,” “discipline,” and “responsibility,” to this week’s new set of rules capping salaries and bonuses at troubled firms taking TARP money. In between, every member of Congress in sight of a microphone has taken their own shot as well, with comments differing only in terms of degrees of controlled anger.
Missouri Sen. Claire McCaskill (D) takes to the Senate floor in a tirade calling the Street, “sneaky guys” and asking, “What planet are these people on?” Meanwhile Iowa Sen. Chuck Grassley (R) demands that the president somehow get the bonus money “back.” And Connecticut Sen. Chris Dodd (D), Chairman of the Senate Banking Committee, threatens to drag Wall Street executives before his committee to publicly explain themselves if they misused public money.
Amid all types of calls for new investigations, leave it to House Financial Services Committee Chairman Barney Frank (D., Massachusetts) to put it all in perspective. Speaking to reporters this week, he tells the Street, “People really hate you, and they’re starting to hate us because we’re hanging out with you. And you have to help us deal with that.”
This takes us straight to the point about all the “Washington anger” spilling across the nation’s various news media this week. Wall Street is on the ropes because members of the House and Senate are hearing in droves from their constituents – i.e. “the voters,” i.e. their own most important “shareholders,” – that they are outraged over taxpayer bailout money going to foot the bills for people who regularly make more money in bonuses than they could ever hope to make in a lifetime. Add in skyrocketing unemployment rates and it’s no wonder that, as Chairman Frank went on: “There is now a deeply rooted anger on the part of the average American at what he or she thinks is a very unfair set of arrangements” with the financial services industry.
And anyone on Wall Street who thinks things will calm down now is in for a rude awakening. Their problem is magnified (in pure “Washington” terms) by the fact that this growing voter anger cuts across party lines. It’s become one of those issues, like “education,” which has only proponents and no opponents. So while plenty of Democrats are venting against troubled banks, there’s just as many Republican members hearing the same outrage from their constituents. Thus, you have a conservative like Georgia Sen. Saxby Chambliss (R), saying that although he’s “concerned” about government intrusion into the business world, “any company that receives federal dollars has to be responsive to taxpayers.”
Now senior Republicans, like Sen. Richard Shelby of Alabama, the ranking member of the Senate Banking Committee, and Rep. Darrel Issa (California), the ranking member of the House Government Reform and Oversight Committee, are moving in their respective chambers to call for the creation of a special independent commission, in the vein of the 9/11 Commission, to examine in detail the moves that caused the economic implosion. While the White House is not thrilled about starting down that path right now, you can bet this is the type of Congressional action that can gain a lot of momentum very quickly.
While it’s still true that the federal government views Wall Street as too important to fail, the Street must brace itself for the coming changes. There’s not only a bunch of new sheriffs in town (the new SEC, the new TARP II regulations, and the coming new rules for the financial industry as a whole), the angry townspeople that make up the American public have suddenly become the Street’s new shareholders.

Political Observations of the Week:
“For Wall Street, it’s business as usual – big bonuses, big parties, and banner names on stadiums. And meanwhile, the country is in economic turmoil.”
Rep. Ted Poe (R., Texas)

“They ought to give ‘em back or we should go get ‘em.”
Sen. Chuck Grassley (R., Iowa), urging the Obama Administration to take back the bonuses handed out at Wall Street firms that took TARP money.

“I’d like to throw these guys in the brig. They’re thinking the same old thing that got us here, greed. They’re thinking, ‘Take care of me.’”
Vice President Joe Biden, on Wall Street.

“This bill is a stinker.”
Sen. Lindsey Graham (R., South Carolina), on the stimulus bill.

“I never saw a tax cut fix a bridge.”
Rep. Barney Frank (D., Massachusetts)
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John J. Kohut is an independent political analyst in Washington, D.C. He has been writing about national politics for more than a decade, including stints as an editor at the Cook Political Report and as senior editor at the Rothenberg Political Report.