5 Years After the Crash, What do Americans Think of Wall Street, Banks, and Free Enterprise?
Friday, September 13, 2013
While many have investigated the causes of the financial crash, few have examined the public’s reaction to it.
On the fifth anniversary of the financial crisis, news organizations have provided extensive examinations of the causes of the near meltdown of America’s financial system. Missing from these investigations has been an assessment of the public’s reaction in September 2008 and their views of the crash in the years since. In a new AEI ebook, we remedy this deficiency by reviewing polls from major pollsters who have asked Americans about Wall Street, banks, business, and the free enterprise system.
Although the problems that led to the near collapse of the financial system had been brewing for years, the public didn’t start paying attention to them until mid-September 2008. In the months before the crisis, most people were watching the historic presidential race between John McCain and Barack Obama. But as the financial sector dominoes began to fall, Americans became riveted to the crisis.
The persistent lack of trust in Wall Street five years after the crash suggests that many Americans have deep misgivings about the operations of the financial sector.
Consumer confidence plunged to 57.6 in October from 70.3 in the September report of the University of Michigan/Reuters index of consumer sentiment, the sharpest drop in the 50+ year history of the index. Forty-one percent told Gallup/USA Today interviewers that they were afraid. Fifty-three percent told the pollsters in another question that they were angry. The economic distress produced by the recession and the financial crisis left a deep imprint on public opinion, and it is still being felt today. Although there is some evidence that people believe the economy has begun to recover, it is tentative at best.
Public anger has abated, but there has been no recovery for Wall Street in public opinion in the past five years. Positive views about Wall Street have never been high, but they plunged to the lowest levels ever in 2008 and 2009. Views about the morality and ethics of the people working there nose-dived, too. The combination of negative views about Wall Street’s actions and morality, and concern that these distant institutions could cause the ruin of the financial system, has been a toxic one. Americans aren’t ready to forgive and forget.
Opinions about banks have fluctuated in recent decades, with sharp declines in the recession of the early 1980s and again during the S&L crisis in the late 1980s and early 1990s. Banks took a hit again in 2009, but according to both Gallup and Pew, views have improved sharply in recent months, although they have not yet reached pre-crisis levels.
Business as a whole came through the crisis remarkably unscathed. Large majorities of people believe, in the words of a Pew poll, that “the strength of this country today is mostly based on the success of American business.” In 1987, the first time Pew asked this question, 76 percent agreed. A few months after the financial crisis hit, an identical 76 percent gave that answer.
As the financial sector dominoes began to fall, Americans became riveted to the crisis.
Given current negative views of Wall Street and mixed sentiment about banks and business, one might expect the public to be clamoring for greater federal regulation. But polls show Americans have grown more, not less, skeptical in the last five years of government regulation of business. They still want the feds to crack down on Wall Street and the financial institutions they see as responsible for the crash. But on the whole, antiregulatory sentiment is high. In Gallup’s latest question, 47 percent said there is too much regulation of business and industry. Twenty-six percent said there is too little and 24 percent said the amount of regulation was about right. In a Harris question, however, around eight in ten say Wall Street should be subject to tougher regulation.
Free enterprise, the foundation of America’s economic system, still gets very high marks from the public (89 percent viewed it positively in a recent Gallup poll), although “capitalism,” perhaps because of its association with Wall Street, gets lower marks (61 percent viewed it positively in the same Gallup poll).
The persistent lack of trust in Wall Street five years after the crash suggests that many Americans have deep misgivings about the operations of the financial sector. Americans believe that many of the people on Wall Street are not ethical or concerned about the well-being of the country. Trust, once lost, can be regained, but it happens slowly. It will likely be some time before people have positive feelings about Wall Street again.
This essay is adapted from the ebook Five Years After the Crash: What Americans Think about Wall Street, Banks, Business, and Free Enterprise published by AEI and available on Kindle, Nook, iBook, and as a PDF. The new edition of AEI’s Political Report also includes data on this subject. Karlyn Bowman is a senior fellow and Andrew Rugg is a research assistant at AEI.
FURTHER READING: Bowman and Rugg blog about public opinion in their weekly “What You May Have Missed in the Polls” series. Mark J. Perry and Robert Dell explain “How Government Failure Caused the Great Recession” while Peter Wallison and Edward Pinto describe “How the Government Is Creating Another Housing Bubble.” Arnold Kling warns that Wall Street is once again capturing government in “Your Mortgage, Their Rent.”
Image by Dianna Ingram / Bergman Group