So why did stocks collapse the moment the vote was tallied in Massachusetts?
It’s because the immediate reaction to the Brown election—in both parties—has been a dangerous lurch toward antibusiness populism. The Obama administration’s strategy has been to latch onto something that both parties can agree on: lynching Wall Street…
Don’t think that Republicans can’t be sucked in when an anti-Wall Street lynch mob gets its blood up. Recall that Sarbanes-Oxley, the devastating antigrowth response in 2002 to the Enron and Worldcom scandals, was passed with virtually unanimous support by Republicans in Congress, and signed by a Republican president. Recall that last year 85 House Republicans voted for a 90% tax on bonuses for any employee of any bank that took more than $5 billion in TARP money.
Investors got some good news last Friday. Stocks resisted following through on Thursday’s sharp plunge after it was announced that the Senate Banking Committee’s Democratic Chairman Chris Dodd and Republican ranking member Richard Shelby have reached an impasse on bank re-regulation. That’s a nice down payment on what investors need a lot more of now: proof that the GOP won’t join Democrats in a populist rush to seek revenge against Wall Street.