Why Main Street Needs to Bail Out Wall Street

On Monday I left my New York financial district office to get some lunch and Jesse Jackson was out on the street leading a protest of union members against the government's financial bailout plan.

"Bail out working people, not Wall Street," was among their chants.

What they didn't understand was that "working people" (I resent the implication in this phrase, incidentally, that non-union, white collar employees don't really "work") are inextricably tied to Wall Street.

It's understandable that many citizens are struggling to grasp why it's so important for the government to spend $1 trillion or thereabouts to buy the troubled assets of financial institutions, many of whom wound up in this mess because of their own irresponsible behavior. Populist rhetoric from lawmakers on both sides of the aisle isn't helping. In his column in today's New York Times, Thomas Friedman lays it all out perfectly:

"This is a credit crisis. It’s all about confidence. What you can’t see is how bank A will no longer lend to good company B or mortgage company C. Because no one is sure the other guy’s assets and collateral are worth anything, which is why the government needs to come in and put a floor under them. Otherwise, the system will be choked of credit, like a body being choked of oxygen and turning blue.

Well, you say, “I don’t own any stocks — let those greedy monsters on Wall Street suffer.” You may not own any stocks, but your pension fund owned some Lehman Brothers commercial paper and your regional bank held subprime mortgage bonds, which is why you were able refinance your house two years ago. And your local airport was insured by A.I.G., and your local municipality sold municipal bonds on Wall Street to finance your street’s new sewer system, and your local car company depended on the credit markets to finance your auto loan — and now that the credit market has dried up, Wachovia bank went bust and your neighbor lost her secretarial job there.

We’re all connected. As others have pointed out, you can’t save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We’re all connected. “Decoupling” is pure fantasy.

I totally understand the resentment against Wall Street titans bringing home $60 million bonuses. But when the credit system is imperiled, as it is now, you have to focus on saving the system, even if it means bailing out people who don’t deserve it. Otherwise, you’re saying: I’m going to hold my breath until that Wall Street fat cat turns blue. But he’s not going to turn blue; you are, or we all are. We have to get this right."

Actually, I think Mr. Jackson understands this perfectly, but he'd rather exploit citizens' fears than tell them the truth, because doing the former preserves the tattered remains of his political standing. The nomination by Democrats of Obama — who, unlike Jackson and other liberals of his generation, prefers to appeal to the better angels of our nature than to our basest anxieties and class resentments, is ushering in a new era for the left. And that era has little room for demagogues like Jackson.