What's the Matter with Wall Street?

Brad DeLong looks at the degree to which Wall Street has bounced back from the collapse under Obama, and wonders why bankers have turned completely against the president:

Why? It is not as though Wall Street has done badly under Obama. Stock prices are up and interest rates are down, so leveraged financial institutions long assets–as Wall Street inevitably is–have done very, very well indeed. The standard bargain that the Democrats offer Wall Street has held. It is:

We will try to tax you (and, given the power of your lobbying operation in Congress, probably fail to do so), but we will give you competent economic management in striking contrast to that offered by the ideologically-blinded wingnuts who are the Republicans.

That has been the bargain that the Democrats have offered Wall Street from the days of Hoover to Bush II, and when Wall Street has had a sense of its own long-run interests, it has taken the Democrats up on it. And it has been happy.

This, to me, is a variation on the “What’s the Matter with Kansas” thesis. “We (Democrats) are good for your financial well-being, so why are you opposing us and voting against your own economic interests?”

The issue, of course, is that there’s more to feeling represented than straightforward economic interest, and that goes for bankers as well as working-class whites in the Midwest. If Barack Obama had offered the same exact policies, but gone out of his way to praise bankers, I doubt that Wall Street would have much against him. After years of flattery and deference from both sides of the political aisle, Wall Street feels entitled to nothing but positive reinforcement.

By criticizing Wall Street—and placing some blame for the crisis on their shoulders—Obama is diminishing the psychic rewards of working in the financial sector. People respect bankers far less than they did in the past, and that’s what Wall Street is reacting against. Republicans might not be better for their long-term economic interest, but they will at least try to enhance their status in the eyes of the public. It’s resentment-fueled politics for rich people.