“I’m Middle Class. Please Save Me!”

   Judging from what many financial pundits are saying nowadays, it seems that the administration and Congress are preparing a strict “no nonsense” new set of regulations, including criminal laws, that will be able to prevent a recurrence of the ’08 financial meltdown.  One reason for this, they say, is because the “middle class” has been “devastated” by the loss of value in their homes, the rising unemployment and the shrinking of their pensions and retirement accounts.

   I don’t believe it.  At least, not yet.

   I think it is way too early to predict just how much they actually want that kind of change.  I think that pundits have a fundamental misconception of what the “middle class” is.

   They are not the “middle” but the “struggling” class.  They have been promised and have bought (but rarely fully own) “The “American Dream”.  What goes into it may vary, but in general it means owning your own home and sending your kids to college, and probably more, because they will have more than what you have.  It means retiring when you have not lost interest in sex and adventure, and can even risk some of that nest egg on the kind of “crazy” schemes that you wouldn’t have dared when you actually had a job.

   This was all fantasy, of course, but it was as solid as the firm mattress they slept on. 

   True, some of the Americans in that “struggling” class aren’t sleeping as well as they used to.  But I’m not sure they would sleep any better if they were promised that their homes, now “underwater” financially, will never again have a market price as high as just before the bubble burst.  I also don’t think they want the financial markets to be so “honest” that they will never again have the chance to score a big payoff, like when some of them sold their Enron shares before it crashed.

   Maybe some “tough” laws will restrain the banks and investment firms.  At least for a while.  But, don’t forget, the majority of the “struggling” class did not lose their jobs, and they weren’t ready to sell their homes yet anyway.  So they haven’t felt the kind of “devastation” that the pundits claim will support true reform of the financial industry.

   In short, they are ready to start struggling for that dream again.  In fact, one reason why they would feel safe again is if some of those “big fish” of finance actually went to jail.  That would mean that the “reformed” markets are safe again for honest strugglers like themselves to get rich.  So that the promised dream would come true, just as they always knew it would.  But if all the reformers can promise them for the future is that they will never again be offered those “risky” investments they lost so much money on, then real reform is doomed.  Those damned regulators are always standing in the way.

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