You didn’t have to watch CNBC or Bloomberg TV very long after President Obama’s remarks late this morning to experience Wall Street’s consternation. The Dow finished down 2.01%, and the S&P finished down 1.90%, as major banks got pounded.
When I talk to my clients, they understand Main Street’s anger at suffering prolonged unemployment and recession while the banks have already recovered enough to repay their TARP and pay out big bonuses. What they don’t understand is how President Obama could ignore the negative economic consequences of his bank tax and bank restrictions and the fragility of this recovery that will depend so heavily on restoring bank lending. They’re also skeptical that these remedies would prevent future financial crises.
A lot will depend upon the details of how these policies would work. We don’t have those in today’s remarks by President Obama or in the White House release. We’ll get more details in the President’s Budget on February 1.
One thing is clear, the populist sentiment behind punishing the banks is so strong that Congress seems unlikely to resist it. The banks launched a major lobbying effort today to stem that tide. This Politico article captures the by-play well.