David Paterson hasn't fared well over the past two years as
governor of New York State: unemployment is high, taxes are out of
control and the state's budget is a mess. As Michael Barone pointed
out in a recent column, people continue to flee the state in droves.
But I give Paterson an "A" for honesty. He's possibly the only liberal
politician willing to admit publicly that the greed merchants on Wall
Street are a necessary evil for big government liberalism to survive.
It is, of course, very fashionable to beat up on Wall Street these
days, particularly for those on the left. President Obama went on 60
Minutes to call the CEOs of the biggest banks "fat cats," feasting off
of government bailout money as unemployment remains high, before he
herded them into a room in the White House (or at least most of them;
the flights for the CEOs of Goldman, Morgan Stanley and the chairman
of Citigroup, were delayed so they attended via a conference call) and
asked that they start extending more loans to small business and not
pay themselves too much.
But Obama, unlike Paterson, is being disingenuous; aside from a few
snotty remarks, the president hasn't done much to get the banks
lending right now. In fact, his policies have fostered an environment
that allows Wall Street to make money -- bundles of it as demonstrated
by Goldman Sachs' $20 billion bonus pool -- at the expense of helping
Main Street. Obama has supported Fed Chairman Ben Bernanke's near-zero
interest rate policy; he's basically declared every big bank Too Big
To Fail, meaning the federal government will save the likes of Goldman
Sachs if it should somehow bet wrong in the trading markets, as it did
last year.
That means the banks can borrow cheaply in the open market, and in a
pinch from the Federal Reserve itself, to finance not lending but
their trading in bonds. Why would any bank need to take a chance by
lending money to a struggling small business when it can take almost
no risk and earn countless billions by simply borrowing at next to
nothing, buying a bond and pocketing the difference?
My guess is that Obama is allowing Wall Street to make such easy money,
doing as Goldman CEO Lloyd Blankfein calls "God's Work", because the
president knows that there's a limit to the amount of debt the Chinese
will buy to expand all the socialism he's unleashing on the American
people -- from stimulus packages that don't stimulate to health care
reforms that make a bad situation even worse. At some point, he will
need Wall Street to step in and buy those Treasury bonds the Chinese
may soon refuse to buy. In the meantime, small businesses get the
shaft so Goldman Sachs can make money to finance big government.
The president wont tell you this because he knows that large portions
of the electorate don't agree with Obamanomics (check out his
floundering poll numbers) so in order to get his agenda through, he
spins a class warfare tale about Main Street versus Wall Street even
as he uses Wall Street to advance his big government agenda.
Paterson, on the other hand, is fessing up to this unholy alliance.
It began a couple weeks ago when he took a not-so-veiled shot at one
of his likely challengers, state attorney general Andrew Cuomo, who
has continued the office's Wall Street bashing tradition that began
under another AG who became governor, Eliot Spitzer. Cuomo has been
investigating Wall Street's huge bonuses; he once threatened to go
public with the names of executives earning huge bonuses at AIG, the
large insurer that was bailed out by the government last year, if they
didn't return the money.
Cuomo's Wall Street attacks have earned him huge recognition, and at
least according to the polls, a large lead over Paterson in a
Democratic primary. Paterson, however, believes the attacks are
counter productive; politicians in Iowa don't go around attacking the
agriculture industry, and they don't attack big oil in Texas. So why
are so many NY Pols attacking the investment banks that feed the
monster of big government in New York State that they created and
sustain?
It was, of course, a great question, whether you agree with New York's
big government or not (I don't). Cuomo, to his credit, has spoken about
the need to cut taxes and slash the state's bureaucracy, though I find
it hard to believe he's about to kill the monster his father helped
create (Andrew is, of course, the son of former NYS Gov. Mario Cuomo)
Over the weekend I interviewed Paterson on WABC radio (I was filling
in for the regular host, Larry Kudlow) and he made the following
point: Because of all the class warfare from the likes of Obama and
Cuomo, the $20 billion in bonus money that Goldman has amassed will
probably be handed out to executives not in cash but mostly in
restricted stock (the decision to be announced shortly), which the
state can't get its grubby hands on.
For all his negatives so far, Paterson's logic on this issue appears
to be resonating, at least with Cuomo. As the New York Post reported,
the AG seems to be backing off his threat to publicly chastise the AIG
bonus babies. He knows he will need them if and when he becomes
governor.