It’s irksome to hear politicians talking about Wall Street and Main Street as if they were two different places. Please: The same people walk down both streets (though some are undoubtedly better dressed) and we are those people.
We don’t walk in a literal sense, obviously. Even most of the firms that operate under the banner of “Wall Street” aren’t actually located on that little stretch of asphalt in downtown Manhattan.
Similarly, the “Main Street” that is used rhetorically to evoke nostalgia for cozy small-town America does not begin to encompass the strip malls, office blocks, car dealerships and department stores that it actually denotes.
You might say that these are just harmless shorthand phrases that help in explaining the current state of things. But they’re not: Pitting Main Street versus Wall Street is a rhetorical trick designed to obfuscate the degree to which the financial services industry and the American economy are intertwined and interdependent.
If you have a mortgage, or a pension fund, or stocks, or shares in a fund that buys them, you’ve got a stake in Wall Street. If you’re making payments on your Acura, or took out a home equity loan to furnish the family room, you need banks to have liquidity.
People who work on Wall Street – and at Fannie Mae and Freddie Mac – tend to make a lot more money than other taxpayers. The multi-million-dollar salaries of senior staff at what were quaintly known as “investment houses” are enough to make even the doughtiest capitalist want secretly to indulge in a little class warfare.
It’s hard to see how these people created value, in any kind of Main Streety way. It’s hard to see what they made or did to deserve such fabulous compensation – the chefs, the drivers, the houses in Greenwich with twenty bathrooms.
But they did what Main Street wanted them to do: They helped send money sluicing through the economy, and from debt they spun profits, and those profits gave us a surge of well being when we opened our monthly statements. And didn’t it feel good to see the value of your house rising without any effort on your part?
The truth is, we are all of us complicit in this meltdown. We’ve been living in giddy denial of the thrifty practices of our forbears.
When it came to soaring house prices, Wall Street and Main Street both forgot the most basic maxim of all: Past performance is no guarantee of future results, and what goes up has a tendency to come down.
It is true that brokers lured the gullible into taking out foolhardy and colossal mortgages. It is true that Democrats pushed for years to “democratize” credit, to make available to the manual laborer the kind of extravagant borrowing once available only to the man in the pinstripe suit.
But we were all soaring on the intoxicating vapors. The housing market seemed like it wouldn’t quit. People were “blowing out” kitchens in grand renovations and laying down marble and flipping properties. Cleaning ladies bought houses with pools. Thousands of illegal immigrants were movin’ on up – until they couldn’t make the payments.
I can understand the temptation to set Main Street against the plutocrats on Wall Street. If it were true, we could all take comfort in this debacle being “their” fault.
But what we call Wall Street is a chimera, a misshapen creature comprised of ambition, ingenuity, regulation, and the millions of financial decisions made by tens of millions of us Main Streeters, all of whom have hoped, reasonably enough, to do well.
It’s a commonplace to say that the greater the risk, the greater the reward. The trouble is that you have to flip the sentence around really to appreciate its meaning.
The greater the reward – and boy did we enjoy those house prices, that easy credit! – the greater the risk we were taking. Now we are beginning to glimpse just how colossal the risk really was.
Examiner columnist Meghan Cox Gurdon is a former foreign correspondent and a regular contributor to the books pages of The Wall Street Journal. Her Examiner column appears on Thursdays.
