I’m a fan of Planet Money, so I hate to first bring up Adam Davidson by disagreeing with him. But his article in Sunday’s New York Times, “What has Wall Street done for you lately,” begs to be refuted. The article (mostly) defends Wall Street by pointing out that we need finance, which is like defending McDonald’s by saying that we need to eat.
The big problem is that he defines Wall Street, I think fairly, as “the country’s largest investment banks, commercial banks and a few big insurance companies,” but he immediately conflates these big, powerful institutions with finance in general. He points out that we need mortgages. We do. But we don’t need to get them from giant, powerful institutions. He points out that we need loans. We do. But we don’t need to get them from giant, powerful institutions. Then he includes credit cards in the list, which is shakier, but even if we accept that having a Visa card has become essential, that doesn’t mean we have to get it from Bank of America. (And before you answer that we have a choice, I used to have credit cards with various small banks that were gobbled up by B of A and Chase. Where was my choice? In theory I could cancel them and get new ones, if I could pay off my balances, and if I didn’t expect to just wind up at B of A and Chase again).
After conflating Wall Street and the modern financial system, he then decides that the modern financial system is the only way for anyone in the world to get a reasonable loan. “Most people in the world don’t have access to a modern financial system, and there is almost no way, other than through greedy loan sharks, for the surplus cash of the very rich to get in the hands of the poor.” Really? Really?
And how did all that surplus cash wind up in the hands of the rich anyway? Not because they earned it and saved it. Nobody earns a billion dollars in any real sense. One of the many reasons to hate Wall Street is that it extracts money from the real economy and keeps it for itself.
At the end, Davidson tries to return to reality by pointing out that it’s okay to hate Wall Street. But this is the standard lazy-journalist ploy of saying, gosh, both sides have merit. And even then, there’s this gem:
Most [economists] know that Ben Bernanke, Henry Paulson and Tim Geithner (like central bankers and treasury officials everywhere) were following the hallowed advice [in the big Wall Street bailout] that Walter Bagehot, onetime editor of The Economist, set down in 1873: during a crisis, a country must do everything possible to preserve its banks.
And if someone said it in 1873, it still must be true today, right?
This article can’t even be justified by saying that the New York Times is simply playing up to its readers, who are economically comfortable and uninterested in anything that smacks of radicalism. While it’s true that the Times can play to its base too much—God save us from another “I’m expressing my feminism by giving my daughter every advantage I can” article, although for the record it’s been a while since I’ve seen one—in this case the readership is spot on: the article is getting savaged in the comments.
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