George Bush Shoe-Thrower Mirrors Wall Street's Antipathy

December 16, 2008

(bettertrades) - As the final days of the Bush Presidency wind down, much like the rest of America, Wall Street is searching for new direction. On December 14th, just over a month before the official transition to the Obama administration, the now infamous shoe incident marks what could be the final watershed moment signaling the collapse in confidence of the Bush administration.

Muntadar al-Zeidi, the Iraqi reporter who brazenly tossed both of his shoes at President Bush during a joint press conference between the American and Iraqi Presidents, has quickly become a YouTube legend. For obvious reasons, the Iraqi public's displeasure with the American President goes far beyond malcontent. The underpinning symbolism of al-Zeidi's actions mirrors what has become a crisis in confidence in the Bush administration on Wall Street.

When President Bush came into office in January of 2001, the S&P 500 was trading in the mid 1,300's. As of December 2009, the index has lost roughly 35 percent of its value. Of note, the major indexes did briefly touch all-time highs in the fall of 2007 under Bush's watch before the credit and housing crisis wiped all advances off the map. The fragility of the Iraq situation and colossal increases in government spending (Mostly due to entitlements) served to infuriate the previously dogmatic right wing of the Republican party, eroding President Bush's power base, and thusly, his ability to provide leadership.

To the discontent of most liberals, the economy's malaise cannot be laid entirely at the doorstep of the Bush administration. Most economists agree the housing crisis lies at the root of the financial meltdown, and the foundation of the housing bubble can reasonably be traced back to Greenspan's era of easy money. The relaxation of loan standards under the Clinton administration coupled with predatory lending practices played an instrumental part in fostering an era of opaque lending. For certain, investment banks that sought and achieved increased leverage promulgated the bubble by taking on more risk than they could bear.

With the eventuality of systemic risk rearing its ugly head and consumer panic heightened to the point of run on banks and forced redemptions at hedge funds, it has become clear that market participants are wary of government intervention. Yet segments of Wall Street have had little choice but to come to Uncle Sam, hat in hand, asking for help.

Even before the legendary shoe throwing incident, Wall Street gave substantive hints that its lame duck President was not able to rev the sputtering engine of the economy. Stocks rallied on news of Obama's Timothy Geitner nomination for Treasury Secretary, touching on a related crisis in confidence in Hank Paulson. Bush's tainted public perception has clearly spread to other branches of the government. According to the most recent ABCNews/Washington Post polling numbers, President Bush's approval rating stands at 23% while 73% of Americans disapprove the President. Interestingly enough, Congress is still winning (Or losing) Americans' seal of disapproval.

Will stocks be set on an ascending course the moment Obama takes the reins of power? Probably not. Obama's plans to increase the cap gains tax in addition to a huge slate of spending centered around his health care plan has sent some investors running for cover. But central institutions that rely on credibility, like the office of the Treasury and the Federal Reserve, will likely receive an artificial boost in confidence after the lame-duck President is gone. So while Wall Street won't throw a shoe at President Bush on his way out of office, some just might throw a party celebrating his departure.