Finance

Wall Street, Heal Thyself


At first glance, it is difficult to take the Occupy Wall Street protests seriously—in part because the participants seem to be having so much fun. On Oct. 2, the start of a third week of demonstrations against the financial industry, visitors to Zuccotti Park in Lower Manhattan might have thought they had stumbled on a carnival, or an East Coast spinoff of Burning Man. A shirtless protester writhed to the beat of an African drum while another waved a flag with the slogan “Generation Revolution.” A punk rocker with a dog collar around his neck and a safety pin through his nostrils spoke about the virtues of peace, love, and anarchy.

The frivolity was deceiving. The Occupy Wall Street protests have proven more organized, disciplined, durable, and yes, businesslike, than critics—and even many supporters—might prefer to believe. There is, for a start, plenty of free food; nobody is condemning the financial sector’s excesses on an empty stomach. Organizers send out a barrage of tweets, updates, and press releases on laptops powered by portable gas-powered generators. The protesters have published their own slickly designed broadsheet, the Occupied Wall Street Journal, and handed it out to the throngs of reporters, cops, students, nurses, teachers, truckers, union leaders, military personnel, and myriad curiosity seekers who have converged on the steps of the New York Stock Exchange. The paper’s lead story began with a virtual declaration of victory: “What is occurring on Wall Street right now is remarkable. For over two weeks, in the great cathedral of capitalism, the dispossessed have liberated territory from the financial overlords and their police army.”

Hyperbole aside, what the Occupy Wall Street activists—or “Occupiers,” as they call themselves—have achieved is remarkable. The movement reached a crescendo on Oct. 5, when thousands marched from Foley Square to the Financial District—”where their pensions have disappeared to,” in the words of the organizers. Similar protests have taken place in Chicago, San Francisco, Los Angeles, and Boston, where 25 people were arrested on Sept. 30 for refusing to vacate the lobby of a Bank of America (BAC) building. More rallies are being planned in at least 240 other cities, according to the website occupytogether.org. The Wall Street demos attracted the usual celebrity suspects—Michael Moore, Susan Sarandon, Cornel West—as well as Nobel prize-winning economist Joseph Stiglitz, who conducted a teach-in on Oct. 2 for 500 dissidents. He was joined by Jeff Madrick, a senior fellow at the Roosevelt Institute and author of Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present. “It’s very clear that the occupation reflects a deep and broad anger in America,” says Madrick. The listeners in Zuccotti Park were “extremely courteous, extremely attentive, and extremely curious. Some people were more radical than others, but I wasn’t booed for not being radical enough.”

Never mind that the occupiers have yet to occupy an actual building on Wall Street, or articulate concrete goals. At a time of high unemployment and rising levels of income inequality, the demonstrators’ depiction of Wall Street as the chief perpetrator of the country’s economic woes has found an audience. If it’s too early to tell whether Occupy Wall Street will coalesce into a broader movement with staying power, it’s already clear that, like the Tea Party before them, the Occupiers have tapped a reservoir of rage at the American financial Establishment and the politicians perceived to be doing its bidding. To the titans of Wall Street, the protesters may be sources of annoyance, frustration, and outright contempt. But history shows it would be a mistake to ignore them.

 

Thus far, the financial industry’s response to the clamor has been conspicuous silence. “The Wall Street strategy is to duck and hope this goes away,” says Darrell M. West, vice-president of governance studies at the Brookings Institution. That indifference worked pretty well in the protest’s early days. Organizers had anticipated as many as 20,000 participants, but only about 1,000 turned up, and their numbers dwindled sharply in the first week.

Then Occupy Wall Street got a boost from an unlikely source: the New York Police Dept. On Sept. 24 a deputy inspector doused several female agitators with pepper spray. The video of seemingly nonthreatening women twisting on the pavement in agony surfaced on YouTube. It was replayed on The Daily Show with Jon Stewart. On Oct. 1, police arrested 500 protesters for blocking traffic on the Brooklyn Bridge. “It got us a lot of coverage,” says Dan Clark, a 41-year-old graphic designer from Santa Monica, Calif., who claimed to have been living in Zuccotti Park from the first day of the protest. “The fact is, we were ignored by the media until then.”

Despite their swelling numbers, the occupiers haven’t settled on an agenda. They consider their ideological vagueness a point of pride, a sign that theirs is a big tent. “There’s a lot of people who feel the same way we do,” says Philip Amiratti, a bearded 25-year-old Brooklyn resident who lost his job in the publishing industry. He has been camped out in Lower Manhattan for more than a week and doesn’t plan on departing anytime soon. What did he hope the occupation would achieve? He wasn’t sure yet. “Everybody says, ‘What are your demands?’ ” he says. “This isn’t a hostage situation. I’m here to educate the public. There are a lot of things wrong with the financial system.”

The conditions that gave rise to Occupy Wall Street aren’t going away. This is a major difference between the current protests and the antiglobalization movement of the late 1990s, which sought to rally public opinion against multinational corporations at a time when the U.S. was enjoying the longest run of prosperity in a generation. Now unemployment remains moored north of 9 percent. More than 23 percent of homeowners owe more on their loans than their homes are worth. And yet until recently, the country’s biggest financial institutions have reaped record profits. Median pay for CEOs across all industries increased 27 percent in 2010, compared with 2.1 percent for the average worker. That disparity is illustrated by “We Are the 99 Percent,” a Tumblr feed that serves as a kind of virtual companion to the Wall Street demos, where people hold up handwritten testimonials detailing their financial miseries. “I think a lot of these people are saying, ‘We have to do something now,’ ” says William Lazonick, director of the Center for Industrial Competitiveness at the University of Massachusetts Lowell. “That’s why I think protests will go on.”

So what should Wall Street do? While it’s tempting to dismiss the demonstrators as anti-capitalist rabble, the broader economic resentment appears to be spreading. And that could give politicians more license to campaign against the banks, according to Beverly Gage, associate professor of history at Yale University and author of The Day Wall Street Exploded: A Story of America in Its First Age of Terror, a book about the 1920 bombing of the Financial District. She sees parallels between the Occupiers and the Populists of the 19th century, a fractious coalition of farmers and workers unified by their anti-banker sentiment, who eventually produced lasting reforms, including the creation of the Federal Reserve in 1913. “A lot of people said, ‘What do these people want?’ That’s always been true of movements like this,” says Gage. “Different people want different things, but the message that Wall Street can’t get away with this is a very powerful message.”

During the Great Depression, anti-Wall Street protests led by communists and World War I veterans contributed to the defeat of Republican President Herbert Hoover. His successor, Franklin Delano Roosevelt, went on to sign reforms such as the Glass-Steagall Act in 1933, which barred commercial banks from engaging in investment activities for the next 66 years.

Does that mean history will repeat itself? A wave of new anti-Wall Street regulations may seem unlikely now, but that could well change if the world economy plunges into major crisis. And in such a scenario, the appetite among politicians of either party for a bailout of U.S. banks, should they need it, will be close to zero.

So here’s a message for Wall Street: heal thyself. The history of American business is rife with examples of industries that failed to respond to public pressure and instead had reforms imposed on them. The banks can start by rolling back things like Bank of America’s recent introduction of monthly fees for using debit cards. They could place limits on executive bonuses. And they could write off mortgage debt that almost surely won’t be paid back anyway.

Perhaps more important, Wall Street could stand to show more humility. Far from expressing contrition for their role in the economic collapse of 2008, the country’s largest financial institutions have spent millions trying to dilute such reforms as Dodd-Frank. “They have been very successful at fighting reform and watering down key components,” says West. “This is the backlash towards that kind of behavior.” Rather than resist the fight for a more fair and accountable financial system, Wall Street would be better served by joining it. That would be more than smart politics; it might also be the first step on the path to redemption.

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Leonard is a staff writer for Bloomberg Businessweek in New York.
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Ratnesar is deputy editor of Bloomberg Businessweek.

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