If Everybody's Special, Then No One's Special

There's a bumper segment that CNBC keeps running that shows a little clip of Obama saying something to the effect of, "One thing we've learned in this crisis is that we can't have Wall St. prospering without Main St. In this country, we rise as one." Nice sentiment. Rather chilling implications. Does "The One" really think that government can orchestrate that kind of outcome? If Wall St. can't be allowed to prosper rather excessively, there will be no Wall Street, and all those high-powered investment bankers will reinvent themselves as lobbyists on K Street.

There's a fundamental difference between Wall Street and Main Street. Wall Streeters take big risks and work 70-hour weeks to get rich. Main Streeters generally have more modest ambitions. Besides, from where I sit, it looks like Wall Street just got taken to the cleaners by the schlubs on Main St. Wall Streeters bet the ranch on the premise that Joe Homeowner would not stop paying his mortgage unless he lost his job. Indeed, never before in the annals of financial history did he. The Street got lulled into the dreamy-eyed notion that home ownership would make responsible citizens out of deadbeats, and if it didn't, then perpetually rising home prices would bail them out. So they wrote ever more piles of crappy mortgages until finally the housing market collapsed under the sheer weight of it.

Looks like Wall Street got the worst of that one. And in the process, may have extincted itself. Oh, well, maybe there is something better to do with one's life than levering up mortgage paper 40 to 1 and charging 2 and twenty.

The enduring question remains, "Why?" Why did the market mechanism break down? Normally, borrowers show a little fear of not being able to repay, and lenders show more than a little fear of not being repaid. Borrowers and lenders alike acted as if they would never have to live with the consequences of their actions.

All I can say is that there was a general sense that the rules were suspended. It was a free-for-all, perhaps driven by some sense that tomorrow may never come, so why not live for today. Tomorrow has come. It may not have, but it did.

So there's going to be some changes. Not that he's asking me, but if he did, I'd direct the exalted One's attention towards the late, lamented Glass Steagall as a starting point.