Harold Meyerson writes:
The Democratic Party’s romance with Wall Street may finally be breaking up. In the past 10 days, a diverse group of Democratic senators scuttled Larry Summers’s candidacy for Federal Reserve chair and New York Democrats voted for the mayoral candidate whose campaign was an attack on Michael Bloomberg’s care and feeding of the super-rich at the expense of the rest of the city. Former commerce secretary (and JP Morgan Chase executive) William Daley’s surprise withdrawal from the Illinois Democratic gubernatorial primary is one more indication of Wall Street’s diminished sway.
There is more at the link.
Yet I view it differently. As I observe the new equilibrium, the Left won a big symbolic victory by striking down the Summers nomination. But it was precisely that — a symbolic victory. When it comes to banking regulation, there is not much reason to believe that “Summers plus current political forces” would have been very different from say “Yellen plus current political forces” or for that matter Donald Kohn.
Symbolic victories are a relatively cheap way to buy off or appease interest groups, and arguably you can view this as part of a broader portfolio — from the Democrats too — to continue catering to Wall Street, for better or worse. After all, share prices did rise on the Summers withdrawal (which by the way does not have to mean he was a bad pick, perhaps Wall Street simply did not like the uncertainty of a highly politicized confirmation battle), so that is hardly a slap in the face to the Street.
One might also expect that, as political polarization increases, political agents will allow more such symbolic fights to arise, or perhaps even manufacture them deliberately. These symbolic fights make it easier to trade with the more extreme or dissident elements in a political party or movement.
The problem with the current budget negotiations is that the Republicans have not yet seized upon what would be the suitable symbolic victory to take home to some of their supporters. Yet likely such a symbolic “victory” (also known as “defeat”) exists and it will be found, and that is one reason why stock markets are up and interest rates remain low.