Stolen

As the financial crisis fades and yet another Fed-induced bubble inflates, we're starting to see some of the enduring social effects of the past year. One of these is what I call "the heist meme." This is the belief -- correct, in my view -- that the various bailouts of the financial sector essentially constitute the largest theft in history. This idea is everywhere; do a Google search for combined terms like "Wall Street" and "robbery." It seems to get traction as the public gets perspective on past events via news reports like this. Bloomberg's Susan Antilla on the upshot:

“I want these swine prosecuted,” wrote Robert Carlini of Richmond, Michigan, an auto-industry executive who says he is a “staunch conservative.” In the 14 years I’ve written columns for Bloomberg News, I’ve had plenty of feedback from investors who said they lost money at the hands of corrupt brokers, plus a steady stream of vitriol from financial executives who say I’m clueless, stupid, and deserve to lose my job. I have never, though, been bombarded with anything like the fury and frustration expressed this time by people far removed from Wall Street, ranging from computer programmers to administrative assistants to the caretaker of an estate. ... Off Wall Street, the rage is palpable. Several readers said they were so enraged that acts of violence were called for against figures in finance.

The heist meme has associated psychological effects. One of these is a developing disconnect between the stock market and the public. During the Reagan years the public became invested in the stock market, both financially and psychologically; what was good for the market and Wall Street was good for Main Street. That connection got exponentially stronger in the mid and late 1990s. The bailouts severed it. Now the public -- again, correctly in my view -- seems to resent every stock market advance as benefiting the same individuals and institutions that got bailed out. Has there ever been a 60% gain in the Dow that's been more hated? This is a sea change in the public's perception of the financial markets, one that I think will last for years and possibly decades. (Side note: One might think Obama and the Democrats, by failing to resolve the ongoing outrage of "too big to fail," ignore the anger at their peril. As the "staunch conservative" shows in the Bloomberg article above, this issue would be an opportunity for Republicans if they weren't in the financial industry's pocket. But they are, and they would rather rant about ACORN anyway.)

One of Wall Street's greatest self-serving achievements since the mid 1990s, with the help of policymakers especially at the Fed, was to make the stock market an institution in American life. When people have basic institutions yanked from them or discredited, whether it's through the destruction of their retirement savings or government-facilitated mass theft, they don't forget it easily. That doesn't mean they get in the streets, as the strangely serene sidewalks in front of the Fed and Wall Street firms demonstrate. But this is the sort of thing that festers. A couple of months ago I saw a clip of a show that Oprah Winfrey did on the economy. One of her guests was a minister from the Midwest who was either retired or close to it. He was despondent. What struck me was his loss of faith in institutions and ideas he had believed in his entire life: the stock market, banks, government, policymakers, regulators, prudence, playing by the rules, the system. One got the sense that even his faith in religion, the main institution in his life, had weakened. He seemed completely adrift.

Losing fundamental institutions can mean different things for different people. Individuals can turn to religion, family, hobbies, or alcohol and drugs. As a nation it can be harder, especially when the institutions represented something as basic as economic security and there's a widespread perception that unpunished -- indeed, rewarded -- impropriety played a role in their loss. As the heist meme spreads, I keep remembering something Thomas Mann said about the lasting impact of early-1920s economic events in his country: "Having been robbed, the Germans became a nation of robbers."