5 Years On, Americans See Wall St. as ‘Foreign ... a Culture Apart’

Views of regulation do not take hold in a vacuum. A number of factors can matter. For example, the lack of public confidence in Congress is well known. What's less often mentioned is the lack of public confidence in the federal government. The authors note, "Behind recent opinions on the regulation of business lurks a pervasive mistrust of the federal government."    

Views of free enterprise are also relevant, as the authors note, "Most (Americans) see business as an important engine of American success." A 2012 Pew Research survey found that 71% agree, mostly or completely, that "the success of American business" mostly explains this country's success.  In 2012, Gallup found that 89% viewed "free enterprise" positively.  Also, views of the role of Wall Street in capital formulation can come into play in considering regulation. From the Harris 2012 survey noted above, 62% agreed that Wall Street is essential because it provides the capital companies need.

Bowman and Rugg refer to the public sentiment on business regulation as "antiregulatory." It would seem then, as a part of business and the free enterprise economy, this sentiment might rub off on sentiments of Wall Street. Nope. While the public trusts business to drive the free market, the public distrusts Wall Street, strongly. "People want more oversight of financial firms and Wall Street…. In fact 82% agreed with Harris pollsters in 2012 that "recent events have shown that Wall Street should be subject to tougher regulations." 

Americans overwhelmingly support increasing Wall Street regulations while decreasing regulations on business. These views are not contradictory. An insight in the Bowman and Rugg paper suggests why. Anti-Wall Street views are not about, as suggested by some observers, the Wall Street bonuses, class warfare or envy. Its not even about the public's misunderstandings about corporate profits.

The anti-Wall Street views here are about something else. The underlying public sentiment, fair or not, is that Wall Street, the authors say, "operates by a foreign code of conduct," i. e.: with a different set of values and mores. The authors conclude, "The consensus is that many of these firms are not ethical or concerned about the well-being of the country."

This is a hefty indictment. It suggests Americans who view themselves as pro business and free enterprise do not view Wall Street as part of American business, but  as part of something else: something foreign, unintelligible and, according to the authors, disinterested in the country's "well-being."

The Securities Industry Financial Markets Association (SIFMA) plans to address this indictment at its annual meeting in November, according to a news report. SIFMA will unveil recommendations it says are aimed to improve trust and confidence in the financial industry.     

Five Years After the Crash is an important paper on a difficult topic that challenges orthodoxy on both the right and left. It offers a more complex picture of public opinion that neither fits conventional wisdom nor can fit on a bumper sticker. It suggests to conservatives why smart regulation of Wall Street is smart; it suggests to liberals there are limits to effective regulation. Let the discussion continue. 

* AEI is a Washington-based conservative think tank committed to "expanding liberty, increasing individual opportunity and strengthening free enterprise"  Its scholars include a "who's who" of conservatives such as: Glenn Hubbard, Lawrence B. Lindsay, Alex J. Pollock, and Peter J. Wallison.