Can Occupy Wall Street make Obama welcome some hatred?

My wife and I went into Times Square for the Occupy Wall Street rally held there Saturday evening.  One of the lead chants was "Wall Street got bailed out; we got sold out." That's a half truth -- and a vague charge, as it leaves the nefarious deeds in the passive voice. Obama thus avoids the direct hit. But not everywhere:

Although that sign is more false than true, I'm glad it's out there. Obama did need to complete the bank bailout and engineer their recapitalization, but he did it with far too few strings attached, and without demanding reciprocal action from the banks in the form of mortgage relief.  I want him pressured from the left -- as FDR was pressured.

Today people love to quote Roosevelt's October 31,1936 campaign speech in which he laid into powerful moneyed interests, who had been excoriating him for instituting a tax on a tax on undistributed corporate profits. Roosevelt responded by campaigning with increasing fervor, according to David M. Kennedy in Freedom from Fear, against "greed" and "autocracy." The Madison Square Garden speech was the climax:

We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

According to Kennedy, however, Roosevelt deliberately drew the fire of financial and big business interests in an attempt to outflank charismatic populists to his left. The most salient threat was posed by a union between the radio demagogue Father Coughlin and the "self-anointed successor to the assassinated Huey Long," Gerald K. Smith, who

mesmerized audiences with his cry to"pull down these huge piles of gold until there shall be a real job, not a little old sow-belly, black-eyed pea job but real spending money, beefsteak and gravy, Chevrolet, Ford in the garage, new suit, Thomas Jefferson, Jesus Christ, red, white and blue job for every man." 

In a head-to-head matchup, Roosevelt had the Republicans beat in that election year. After the bottomless fall of the Hoover years, he had cut unemployment by over 40%, put millions to work in public works programs, revived and reformed the banking industry, implemented social security, etc. etc..  He could be defeated only by a serious third party effort sucking votes from those who could be convinced that Roosevelt did not go far enough in restructuring (or abolishing) American capitalism. When Coughlin and Smith's Union Party came up with a presidential nominee, Kennedy recalls,

Coughlin declared he would produce at least nine million votes for Lemke or quit broadcasting. No one took that claim seriously, but in some states, Democratic pollsters warned, the Union Party might win up to 20 percent of Irish-Catholic votes, enough to sap the political strength of the working-class constituency on which Roosevelt's reelection depended.

Roosevelt's response to this threat, according to Kennedy, was political theater:

To bind the potentially explosive left to him and to reduce its capacity for radical mischief, rhetorical attacks on business were a cheap price to pay. To combat "crackpot ideas," Roosevelt had told a reporter during the "wealth tax" debate in 1935, "it may be necessary to throw to the wolves the forty-six men who are reported to have incomes in excess of one million dollars a year. This can be accomplished through taxation." But in fact Roosevelt's tax proposals had been more bluff than bludgeon. In reality all of Roosevelt's antibusiness "radicalism" in 1936 was a carefully staged political performance, an attack not on the capitalist system itself but on a few high-profile capitalists. This may have been class warfare, as Roosevelt's critics howled, but it was only a war of words.

While there are some tantalizing echoes of 1936 in Obama's upcoming reelection campaign, his situation is all too different. First of all, based on the economic measures that generally determine election results, FDR was a lock in 1936. GDP growth in that year was 12%, following growth of 8.9% in 1935 and 10,7% in 1934.  As Charles McMillion recounts, "After-tax personal income, consumer spending, real private investment and jobs all reached or surpassed their 1929 peaks by late 1936."  FDR could throw a few millionaires to the wolves from a position of strength.  Second, no one could plausibly accuse Roosevelt of a lack of vigor in pursuing the economic interests of the suffering masses, or of a lack of means to do more: he had won overwhelming majorities in both houses of Congress in the 1934 midterms (it was after  his 1936 reelection that Roosevelt in several ways undercut his till-then powerful control over Congress). Because that "lack of vigor" charge can plausibly (if not entirely fairly) be leveled against Obama, a show fight will not do for him: he needs to pursue a course of strong action, against fierce opposition, to relieve the economic distress of millions and reduce economic drag.  The action that remains open to him by executive action alone is mortgage relief - preferably with principal writedowns for many of the tens of millions of mortgages now underwater.

The politics of mortgage writedown might be "terrible," as GOP team economist Douglas Holtz-Eakin, who designed a writedown plan for John McCain in the '08 campaign, confessed to Ezra Klein. But so are the politics of economic stagnation. And this is where OWS comes in: to put some real pressure on Obama to break eggs, and heads, in one arena where he can bypass Congress -- and where his programs to date have failed most dramatically to have any real impact.

Mortgage relief is  difficult to implement equitably. But if a highly competent, moderate Republican regulator like Sheila Bair, immersed in the practicalities of unwinding  failed banks' obligations, thinks that mortgage principal adjustment was doable, then it was doable.  I've not read any plausible defense of Obama's abdication on this front. To have made existing mortgage adjustment programs voluntary on the banks' part, to have left Bush appointee Edward DeMarco in place as FHFA chief and allowed him to block any move to enable Fannie and Freddie to restructure mortgages, to have meekly accepted Republican senators' filibuster of his own nominee, Joseph A. Smith -- Obama's passivity on this front bespeaks either a failure of nerve or an unwillingness to act based on some conviction that undertaking a large-scale program on this front would do more harm than good.

OWS is mainly a movement of the young, more concerned with lack of job opportunity and crushing student debt than with mortgages. Yet a mortgage relief program would be the most substantive way to force substantial giveback from the banks -- and according to many, including former Reagan economist Martin Feldstein, the most effective way to jolt the economy.  A recess appointment of a new FHFA head, followed by a vigorous program of selective mortgage writedown, would be a powerful response to the broad-based "banks got bailed out, we got sold out" grievance.