MY EXCHANGE WITH A WALL ST. ECONOMIST

Last week I received a copy of what I'll describe as a “Market Outlook” review, produced by what was once one of the biggest financial institutions on Wall Street. In a few words the piece complained that things would go from bad to worse under President Obama because his programs were bringing “Big Government” back. It got me going because it came from one of the firms that had been saved by tens of billions in taxpayer dollars.

I looked up the e-mail addresses of the Wall Street economists and – more to blow off some steam than to initiate a dialogue – I sent the following message to the authors. The title of the post was “You Need Help” (I've corrected typos and changed names):

Dr. Wall Street Economist:

I just received your "The Return of Mr. Big Government" analysis.

It pretty much sums up why Wall Street still doesn't get it. No where do you try to explain that "Big Government is Back" because "Big Business" fell flat on it's face and decided to take the country's economy with them. At the end of the day everyone at your firm should be unemployed or looking for work. You don't seem to understand that many in your industry owe your current employment to Big Government and the American taxpayer.

That you try to frame current events in the same manner as a FOX News team says much.

And your prognosis on what happens when you "raise taxes on those earning over $250,000" lacks depth, or any reference to what happened in the 1990s.

Get help (and not from the American taxpayer), please.

Not expecting a response, I logged off. I was surprised to see this in my in box when I came back to my computer (I’ve cleaned up the typos).

Mark:

Thank you for taking the time to send this email, even if you disagree with the message. These indeed are very troubling times and the government is doing all it can to underpin domestic demand and ensure social stability. My own belief is that Washington should be focused on assisting the state and local government sector, which is the second largest part of the economy and cutting back on services and much needed capital spending ...

Huh?

I couldn’t believe it. These are the same guys who collapsed the economy by borrowing money they didn’t have, to bet on products they didn’t understand. And they think sending money to the states so they can cut services and invest in infrastructure (the logic here is rough) is the first step toward fixing the economy?

But wait, it gets better …

… I think given the size of the borrowing requirement from the government, we could very well run into a wall very soon. Even FDR kept the deficit contained at 6 pct of GDP......spending money wisely is essential and we have too much of a fiscal boondoggle at the federal level.

Nice. State the obvious ... and leave out the role of the previous administration in running up record deficits every year. Hey, I have an idea: How about NOT collapsing the economy by betting on financial gimmicks and then having them insured with market players who don’t have the money to pay off on claims?

In the next section Mr. Economist falls back on economic theories that have little to do with the issues at hand, and then sprinkles his point with a little false bravado. Check this out ...

And I agree with you about financial bailouts, and I feel the same about auto bailouts, and this country was built on creative destruction. Most of the people that lost jobs at RCA, Pan Am and Penn Square got jobs elsewhere or retooled and I'm frankly quite willing to do likewise . . .

Look, “creative destruction” refers to outdated industries being replaced by new technologies, or a workforce being forced into new lines of work because of competition. The horse & buggy industry was greatly diminished by the arrival of the train and the automobile industries, for example. Those who worked in the 8-Track tape industry lost out to those working with cassettes, which lost out to CDs, and so on …

The problem here is that, as much as they want to believe otherwise, the new kings of Wall Street aren’t like the Robber Barons of the past. Nor are they replacing old technologies and habits with new more efficient industries. Put simply, they built financial sand castles and sold them like snake oil. At least the Robber Barons who contributed to “creative destruction” in the past left a trail of brick & mortar and some pretty solid blue collar industries in their wake. Today's market fools simply collapsed the economy by making stupid bets.

Interestingly, the stupidity continues . . .

Bailing out banks was not something Mr. Abbot or Mr. Costello requested [he was speaking in the third person here] ... It is being mandated by Obama, Geithner and Bernanke. Yes, yes, the Wild West was created in the financial sector, and yet the regulators (Greenspan) were asleep at the witch.

Incredible. Mr. Abbot is simultaneously saying his company had nothing to do with their collapse while claiming they were forced into being saved with billions of taxpayer dollars by President Obama. There were no other options (like, say, a government takeover). Mr. Abbot wants us to believe that his company was simply caught up in some Big Government conspiracy that was concocted after Big Government fell “asleep at the switch” – irresponsibly leaving the banks to regulate themselves - only to wake up in time to impose uninvited order. Huh? (if you're having trouble following Mr. Abbot's line of thinking, you're not alone).

It’s this kind of pretzel logic that tells me we need to nationalize the failing institutions and force a little creative destruction (i.e. "You're fired.") on Wall Street’s economists - especially the ones who think like this.

Seriously, these people don’t need jobs. They need help.

- Mark