Reactions to the Occupation

Did the "Occupy Wall Street" movement spread in October to "more than a thousand countries"? That's what an excited Diane Sawyer proclaimed on ABC's World News, thus multiplying by five the existing number. Her gaffe reflected the enthusiasm among newsreaders at ABC, CBS, and NBC: Those networks covered the Occupiers massively and lovingly, with 87 percent of soundbites positive and only 6 percent negative, according to the Media Research Center.

That bias was evidence of Occupy Wall Street's successful media-centric strategy, with reality defined by sympathetic network producers. To give just one October example: The NBC Nightly News took viewers "from school to the streets. On Day 24 of the Occupy Wall Street protest demonstrators were joined by a group of students on their day off." The visuals were clips of little children holding signs that read, "Tax the greedy, feed the needy!"

That cute treatment contrasts with coverage of the Tea Party movement in March 2010, where networks described Tea Partiers as "roaming Washington, some of them increasingly emotional, yelling slurs and epithets ... like a page out of a time machine." CNN, which had slurred Tea Party participants, also got into the act, glowing about the Occupiers' resolve and "sky high" morale (which fawning journalists have helped to create).

Overtly left publications like The Militant crowed that "the protest was actively built by groups forming part of the Democratic Party's left wing, including the Working Families Party and MoveOn.org." Conservative media stars Rush Limbaugh and Glenn Beck emphasized those connections and viewed young Occupiers as pawns in the hands of manipulators like George Soros (although no direct linkage appeared) and the Working Families Party (an ACORN affiliate).

Religious left leader Jim Wallis praised the Occupiers: "You have awakened the sleeping giant. ... You have sparked a flame. ... You have articulated, loudly and clearly, the internal monologue of a nation. ... I remember what it feels like to see your movement as a lead story on the evening news every night. ... I was in your shoes 40 years ago as a student leading demonstrations against the Vietnam War, racism and nuclear proliferation."

The response from conservative and moderate media organizations was mixed. FOX News amply quoted Occupiers but also critics such as Sandra Fox of Louisiana who said, "It's horrible what they're doing. These people need to go get jobs." The Wall Street Journal went deeper into the mindset of some Occupiers by noting that young demonstrators "are trying to bust their way into an economy where there is one job for every five job-seekers, and where youth unemployment runs north of 18 percent."

The Journal emphasized reasons why joblessness has persisted: "If anyone in the Occupy Wall Street wants an intellectually honest explanation for why they can't find a job, they might start by considering what happens to an economy when the White House decides to make piñatas out of the financial-services industry, the energy industry ... or various other alleged malefactors of wealth."

The Journal also counted up the hundreds of thousands of jobs lost because of EPA and congressional edicts, and the $1.7 trillion a year that it costs to reply to federal regulations: The Federal Register last year added 81,405 pages of new rules. With other concerns-Obamacare, Dodd-Frank, the potential expiration of Bush tax cuts, and implementation of Obama surcharges-it is "no wonder businesses are so reluctant to hire: When you don't know how steep the trail ahead of you is, it's usually better to travel light."

From other reports it's clear that many young Occupiers travel light in any knowledge of economics and business. Many Occupiers seem clueless about the irreducible complexity of a vast market system, and how hard it is to run even a small organization, let alone a massive one. They complain about private greed for money but don't recognize public greed for power. For example, they blame free markets for housing foreclosures when they should blame congressional pressure on businesses to make loans to those who were not credit-worthy.

Accompanying that cluelessness is an entitlement mentality: Some young Occupiers think they deserve what they desire, and are not getting it only because others are greedy. Some complain about bailouts to banks deemed too big to fail, but think they're too cute to be unemployed. Some have often taken college courses that teach no marketable skills, including clear thought, and because of grade inflation have received A's. One Occupy sign read, "We're here, we're unclear, get used to it."

But if we just get used to it, we're missing something important. Rather than ignore all of the complaints in a kneejerk way or join liberal Christians in fawning over the Occupiers, conservative Christians should provide a clear look at how Wall Street can be improved, as finance expert David Skeel does below. We should recognize the desperate need of many young Occupiers who have time on their hands and faith in nothing. They are sheep without a shepherd. A Francis Schaeffer would see them as a mission field.

Beyond a kneejerk 'no'

A year ago Congress enacted the mind-jarring 2,319-page financial reform known as the Dodd-Frank Act. Now The New York Times and others are proposing a second act: Remove the favorable tax treatment enjoyed by the managers of venture capital and private equity funds. Impose a "transaction tax" on every financial transaction. Force banks to set aside more capital than ever before.

Republican presidential candidates have taken a stand against the explosion of new business regulation. Early this year, Michele Bachmann introduced legislation to repeal the financial reforms, and every other leading candidate agrees that they must go. Is there any reason for a pro-business Christian to disagree?

Believe it or not, there is. Start with the venture capital and private equity fund managers. (Private equity funds are investment funds like Blackstone that often buy companies and take them private.) Profits earned by private equity fund managers are taxed at the low rate that applies to capital gains-that is, to assets held for long periods of time. This is a boon for the fund managers but it's also illogical and unfair. It's illogical because it's based on the fiction that these managers don't actively manage the assets in the funds. In the real world, these managers are just about the least passive managers imaginable. It's unfair because all others pay ordinary income tax on their earnings.

What about the transaction tax, which is designed to reduce the overall amount of speculative trading? Ordinarily, campaigns to discourage speculation are a lousy idea. After all, our markets depend on speculation-on investors' willingness to take risks. But this tax isn't as misguided as most. Institutions that make repeated, super-fast trades based on a computer program now do roughly 50 percent to 60 percent of all stock market trading. This trading is profitable, but it also can foul up the markets: In May 2010, it caused a "flash crash," a sudden drop in the market. Slowing down some of the trading by imposing a small tax isn't a crazy idea.

Those who are still reading may suspect that I will now sing the praises of the massive new financial legislation. Not so. Indeed, I recently wrote a book bitterly condemning much of it. But simply ripping up Dodd-Frank isn't the solution. Some of the new provisions, such as the regulation of the financial contracts known as derivatives, are good. Repeal could make some of the law's biggest flaws even bigger.

Here's what I mean about the flaws. When President Obama signed the legislation, he claimed that it will end taxpayer bailouts forever. It won't. In reality rather than rhetoric, it did little to rein in the too-big-to-fail banks (think Citigroup or JPMorgan Chase, since Bear Stearns and Lehman Brothers are now gone) that made bailouts necessary. There's an obvious explanation for this. As Ron Suskind's Confidence Men shows, both President Barack Obama and Treasury Secretary Timothy Geithner are comfortable with a handful of big banks dominating American finance, much as they do in many European countries. If they protect the giant banks, they know that the banks will do their political bidding in a pinch. The losers are small and medium-sized banks, which can't compete with the favored few. Because more ordinary businesses look to smaller banks for their financing, the corporatist model means fewer loans and less innovation.

This is where the capital requirements come in. One of the few things the new legislation does to curb the biggest banks is to invite regulators to impose stricter capital requirements on them. If Team Obama were serious about ending bailouts, it would have broken up the big banks. But strict new capital requirements would make it at least a little less likely that one will fail and require a bailout.

There is a simple moral to all of this. Although the best regulation is often no regulation, especially when an election is coming up and protestors are dancing on Wall Street, sometimes a tweak to the laws can make our markets safer, fairer, and more competitive. When such proposals come along, pro-business Christians should jump at the opportunity to endorse them.

-University of Pennsylvania corporate law professor David Skeel is the author of The New Financial Deal