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Wall Street Bonus Fight has Roots in Bloody Past

Last Updated Dec 10, 2009 12:57 PM EST

The shooting war over financial bonuses rages on. On one side, angry professionals say they only want what's coming to them. On the other, government officials attuned to a growing sense of public outrage draw a hard line on pay. Pundits across the political spectrum cluck their disapproval at the protestors' gall. Blood and tear gas is in the street.

This may sound like a somewhat purple summation of the current fight over banker earnings. Except it's something else: history. The professionals in this case were former U.S. soldiers, and the shooting and bloodshed were real.

In the summer of 1932, some 15,000 veterans of World War I and other "Bonus Marchers" descended on Washington, D.C., to demand a $1,000 payment that Congress had approved eight years earlier in recognition of the soldiers' military service. Times were tough, and they needed the money.

Lawmakers stonewalled. President Hoover, citing the soaring budget deficit, ultimately vetoed a bill authorizing the bonus. He called out the U.S. Army, and on July 29 a detachment led by Douglas MacArthur, George Patton and Dwight Eisenhower went to disperse a mob of ex-Doughboys marching down Pennsylvania Avenue.

In the ensuing clash, U.S. troops fired on unarmed former American soldiers, killing two. The child of another marcher also died. Interestingly, many newspapers of the time, including The New York Times, condemned the protesters, writes economic historian Charles Geisst. But the already unpopular Hoover was further stained, contributing to his defeat by FDR in the 1932 presidential election.

There are significant distinctions between that earlier conflict and what's happening now. Most obviously, the Bonus Marchers wanted to be paid for serving their country; today's bonus babies want to be paid for serving themselves.

But the events also have important parallels. Both episodes stem from rising social anxiety caused by a major economic crisis. Both were highly politicized, exploited by Left and Right to score points in defense of the American working man. Both marked a fork in the political road, followed by a period of rising government activism. Arguably, both also highlight a societal turning away from the "rugged individualism" that appears on cue during high times toward a more collective vision.

More directly, both conflicts were set against changing public perceptions of the financial class. That alternating change in sentiment, like the cycle of boom and bust it shadows, is itself a defining feature of this country's historically fraught relationship with Wall Street. It makes up one side in the three-way tug of war between finance, government and public opinion.

Regardless of political ideology or professional allegiance, it's hard to make sense of the present-day battles without some understanding of that past.

Also like the Depression, this latest financial mess is turning into a crucible in American history. Its causes are at once a throwback to earlier economic debacles and a possible precursor to future ones. Solutions are coming into focus. But it remains to be seen if the political will exists to enact them.

Nearly 80 years later, our elected leaders face their own test over how to resolve (and cash in on) the friction between Wall Street and Main Street. The actors are different, and we have yet to produce our Huey Longs and Robert LaFollettes (although on some issues congressional rabble-rousers such as Ron Paul and Bernie Sanders do a decent imitation).

But many of the underlying tensions are the same. The public is rightfully exercised, while bankers feel scapegoated. The economy, then as now, needs big business, although how big is an open question. Somewhere along that continuum -- though as usual probably not in the middle -- lies whatever passes for the truth.
  • Alain Sherter On Twitter»

    Alain Sherter covers business and economic affairs for CBSNews.com.