Wednesday, March 25, 2009
The Huffington Post
Monday saw a very interesting and telling moment as the newest iteration of Treasury Secretary Timothy Geithner's banking recovery was met on Wall Street by a jump in the Dow Jones of almost 500 points, a gain of fully seven percent. The big gains on Wall Street occurred amidst several days of bad press and attacks on the banking recovery plan, the AIG bonuses and Secretary Geithner in general from across the political and media spectrum. Progressive economists such as Paul Krugman attacked the plan as being insufficient and essentially the same as the original Bush/Paulson "cash for trash" plan, while conservative Congressman Eric Cantor (R-VA) referred to Geithner's plan as a "shell game."
The vastly different reactions to the plan reveal the growing disconnect between the finance sector and the rest of the economy and the ongoing need to focus on the latter when seeking to solve our most pressing economic challenges. While the rally on Wall Street is not bad news, it would be foolish, at this time, to see this as anything more than a one time event that may have been caused by Geithner's plan, but will be extremely unlikely to lead to significant job creation, reduction of mortgage defaults or revitalized industry in the US.
During the eight years of the Bush administration, and to a lesser, but still real extent, the eight years preceding that, we saw rising fortunes on Wall Street obscure, rather than alleviate, real problems in the economy. Now is not the time to repeat that mistake. Reading too much into the rally on Wall Street only strengthens the increasingly flawed, and more importantly decreasingly relevant, notion that what is good for the finance sector is for America. The disconnect in economic, political and psychological terms between Wall Street and Main Street has grown substantially in recent years and may now be close to being beyond repair....(Click for remainder).