Steve Bannon’s odd journey to economic nationalism

Interesting front-page story this week in The Wall Street Journal that attempts to explain Trump advisor Steve Bannon’s “journey to economic nationalism.”

A defining moment for Bannon appears to be the stock-market crash of late 2008 and the financial losses suffered by Bannon’s now 95-year-old father, Marty Bannon. The elder Bannon lost much of his lifesavings when he sold AT&T shares on October 7, 2008, after hearing a warning on TV from financial commentator Jim Cramer to get out of stocks and into cash.

According to the story, Bannon “says the moment crystallized his own antiestablishment outlook and helped trigger a decade-long political hardening that has landed him inside the West Wing, just steps away from President Donald Trump.”

“The only net worth my father had beside his tiny little house was that AT&T stock. And nobody is held accountable?” Steve Bannon, 63, said in a recent interview. “All these firms get bailed out. There’s no equity taken from anybody. There’s no one in jail. These companies are all overleveraged, and everyone looked the other way.”
No White House official has more influence on a wider portfolio of issues than Steve Bannon, who has become a litmus test for how people view the Trump administration. For supporters, he is helping to deliver on Mr. Trump’s fiery populist promises, with their emphasis on punishing illegal immigrants and U.S. companies aiming to move jobs out of the country. The left has painted him as isolationist, sexist and anti-immigrant.
There were many factors that turned Steve Bannon into a divisive political firebrand. But his decision to embrace “economic nationalism” and vehemently oppose the forces and institutions of globalization, he says, stems from his upbringing, his relationship with his father and the meaning those AT&T shares held for the family.
“Everything since then has come from there,” he says. “All of it.”

Two aspects of this story strike me as especially odd.

First, Bannon’s father was not so much a victim of Wall Street or global elites as he was of bad financial advice and his own misjudgment. He violated at least three fundamental rules of sensible retirement investing:

  1. He failed to diversify and instead had much of his retirement nest egg in one company’s stock.
  2. He ignored normal asset allocation by keeping almost all of his portfolio in the more volatile equities market rather than in bonds even though he was well into his eighties.
  3. And he succumbed to the temptation of trying to time the market, selling his shares in a panic as the market was going down, which almost guarantees an investor will “sell low.” As a result, he missed out on the big bull market that began in March 2009 and goes on to this day.

What about the responsibility of individuals to manage their own finances as best they can? What about the responsibility of children to help their elderly parents? After all, tens of millions of U.S. households managed to survive the financial meltdown by not bailing out at the bottom. Instead, the younger Bannon blames “the establishment” — whatever that is — for inflicting this financial trauma on his family.

The second odd thing about this story is that Bannon has channeled his nationalistic anger at globalization, including illegal immigration and U.S. companies that choose to invest in their affiliates abroad. Populist arguments can be made on both those issues, but I can’t see any connection between them and the stock market meltdown that cost Marty Bannon his retirement savings.

One could plausibly blame the Great Recession on (take your pick) the Fed for keeping interest rates too low for too long, or Fannie Mae and Freddie Mac for encouraging subprime loans, or banks for making the loans, or millions of homebuyers who were looking to make easy money and bought more house than they could afford. But how by any reasonable argument can the crash of 2008 be blamed on low-skilled immigrants from Latin America, or U.S. companies that investment in Mexico and other markets to reach new customers, or NAFTA, or the WTO, or globalization in any general way? Whoever you chose to blame, the Great Recession was homegrown, an America First phenomenon.

If the WSJ story is right, our nation will pay a steep price for one family’s inability to manage its own financial affairs.

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