death wish, dirty harry and how the bank lobby resembles the 1970s uaw

Feel free to talk about the glory days of Led Zeppelin all you want, but the point remains that growing up in the 1970s suuuucked. We had no idea at the time that the explosion in crime rates was a function of the high percentage of males in the 18-24 age bracket, we just thought social order was collapsing. Imagine me, at seven or eight years old, flipping through Time magazine and finding a picture of an American soldier carrying the severed head of a Viet Cong.  You had to be there, at my age, to understand how unrelentingly bleak the news backdrop was but looking back at the Hollywood heroes of the era can give some indication. Charles Bronson was the Mr Average-turned vigilante who had had enough in Death Wish. Clint Eastwood hit his peak as Dirty Harry, “with his finger in the dike while the whole thing was caving in on him”.

Economically, the wage/price spiral that crippled the economy of the 1970s is now a matter of record. People like my parents, granted a 16% mortgage in the mid 1970s, didn’t start making a dent in the principal until a decade later. There was, over all, a desperate feeling of falling behind as prices skyrocketed that combined with the crime rate , geopolitics and poor general  hygiene to make the 70s just miserable.

The UAW, Teamsters and organized labor in aggregate were front and center during this period of economic malaise. Their political power was more or less unassailable – they mobilized members and delivered the votes to the Democrats who dominated Congress.  Strikes and job actions seemed a weekly occurrence in memory and their demands were always met.   Again, you had to have been there to understand how Ronald Reagan’s first act as president, the threat to fire every air traffic controller, was such a giant relief.  The sense was that a pall was being lifted and that some hope existed of the madness coming to an end.

So here we are now with two major market upheavals in recent memory and a political morass where the financial services industry has replaced organized labor as the seemingly unstoppable, Congress-owning corrupting force.  A decent-sized segment of the population has taken to the streets, the modern anodyne to the NOW and anti-Vietnam marches, leveraging their influence with modern media.

The problem for me and for any my age is that we saw in the 70s what happens when the lunatics demand to run the asylum and we have no interest in repeating the experiment. We do not, for instance, want to see a new form of soldiers returning from duty covered in the human shit of student protestors. The current generation of protestors learned about activism in books, where the inconvenient details of the 70s can be glossed over or repressed – for them it’s a romantic pursuit akin to the Civil Rights efforts of the early 60s. They know nothing, in other words, about what it was like to live through the excesses of emotion that accompany periods of significant upheaval combined with economic stagnation.

If there is hope in this comparison of eras, it lies in the UAW/Banking lobby equivalence. The rise of the Republicans in the 1980s was in direct response to the excesses of organized labor in the previous decade, and the hegemony of Big Labor in Washington was steadily removed. At some point, which may or may not be now, the same process will occur for the bank lobby. Things change. The inevitable arrogance of having everything your way, and demanding more and more until forced to willfully ignore the dangers of killing the host implies that current trends are not unsustainable.  Let’s just hope that the process is less depressing than the 1970s.

10 thoughts on “death wish, dirty harry and how the bank lobby resembles the 1970s uaw

  1. William Thompson says:

    Good post except your 16% mortgage didn’t arrive until 1980 when Volker pushed overnight Fed Funds rates to as high as 21% to bust Bunky Hunt’s nuts in silver.
    It was an interesting time……wht

  2. Mario says:

    great points….although I can’t fully sympathize with Reagan, etc. however I see what you’re saying in this regard.

    The only thing that is the fly in the milk here today is that the bank lobby controls BOTH sides of the aisle. They contribute basically to everybody. That means that the “solution” or “antidote” politically to these vicious parasite is a whole new political party that has not even yet manifested that is oppositional somehow to the two already supposedly oppositional parties that exist today….not only a third wheel but a paradigm shift I would say. Either that or they can just change campaign finance and then the parties we have will be forced to really work for the people instead of throwing them a few bones when the going gets a little rough on main street.

    either way great points and perspectives. Don’t forget John Lennon in the 70′s too!! ;)

    • Interloper says:

      Labor had influence on both parties for much of the 70s as well. My point with the “had to be there” is that almost everyone at that time felt some relief, or at least that was my impression at younger age.

  3. PD says:

    In re “If there is hope in this comparison of eras, it lies in the UAW/Banking lobby equivalence.”

    It seems labor vs banking cartels comps / parallels are inconclusive.

    • Enterprise is formed overnight vs labor, which takes time
    • Enterprise can be global vs labor, which is local or regional
    • Enterprise can change its domicile (HSBC boomerangs to Asia-Europe, Halliburton to UAE, US insurers to Bermuda, etc.) vs labor, shackled by immigration or citizenship laws
    • Enterprise usually reflects Berle & Means’s dispersed passive owners vs labor with activist members
    • Etc.

    Germany has numerous state-owned banks that pushed Deutsche Bank et al to other markets like the US and UK. US and UK (and somewhat Switzerland for different reason) however don’t seem to have the option of whipping purseholders into shape (like Reagan did with labor) after intoxicating on free-market ideology for the last three decades and advising emerging markets countries to privatize their state-owned banks. Singapore and China have largely ignored this privatization advice (except when selling foreigners overpriced, insolvent banks).

    When your economy depends on a concentrated few purses, you have no choice but being nice to those purseholders.

    Thoughts?

    • Interloper says:

      Agreed on many points – comparisons like this extend only so far. Cheap foreign labor was identified as boogeyman by UAW in 70s, to political gain, so the use of foreign markets as threat is arbed by both sides. it’s not as clear in hindsight, but the taming of Labor as political force was no small feat, involving incredible political and ecomic risk. Now, Congress and regulators do have the means to design a solution that makes sense, I think, but are constrained by structural forces. ( See my post on design vs execution). Not that this will happen, or be without major hurdles if it does. We can be sure that any powerful lobby threatened with a reduction in influence will proclaim the end of the world, with every means at its considerable disposal.

  4. PD says:

    If the best way to get the banking industry to discipline itself is by competitive force to break the cartel (creditor losses would too but it risks depositors’ monies and industries’ balance sheets), it seems one of the few possible options without additional regulations on mega-banks or the US taking over banks a la UK, is encouraging regional banks, thrifts or credit unions to merge as technology has made banking cheaper to operate, expand or deliver products and it’s increased the value of scale.

    This is roughly the Germany banking model. While the country had a hand in bailing-out its largest bank, US taxpayers paid more via AIG and Germany is not spending as much time debating too-big-to-fail.

    Last question on this topic: any suggestions on what the Congress should enact to design a solution, whether palatable or unpalatable (i.e. un/executable) to the banking industry?

    Thanks for the replies.

    • Interloper says:

      Have to wait 20 years for any regional combo to be legitimate competition, so I don’t think that is answer. Agree with Ritholz – step one is making law that no fin firm can ever be bailed out again. Put it in constitution if necessary.

  5. steve says:

    Well written. I’m Canadian, and I remember going to Boston in the early 80′s for training with my employer. My room mate was from Cincinnati, and I remember asking him about Regan after the air traffic strike and he said Regan made him proud to be American again. Yes, he definitely sounded relieved.

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