Thomas White Global Investing
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February 27, 2009
A Postcard from the Americas
United States: Rick Santelli’s Chicago Tea Party

Chicago Board of Trade

The Chicago Board of Trade, formed in 1848 for trading in agricultural commodities, is the oldest futures and options exchange in the world. The CBOT remains one of the premier exchanges, trading agricultural commodities, bullion, and financial futures and options.

It is not often that business television journalists reporting from trading floors set aside their cautious demeanor and rip into government policies. So, when CNBC’s Rick Santelli launched a tirade against the Obama administration’s housing bailout plan on the trading floor of the Chicago Board of Trade, even the television anchors back at the studios looked surprised. It became even more dramatic as traders around him responded to his feisty comments and pitched in with remarks of their own.

Santelli’s main argument was that, by subsidizing homeowners who have fallen back on mortgage payments and letting them keep their homes, the current administration is ‘promoting bad behavior’. As the money for this financial support will come from higher taxes on other individuals and businesses, the proposal has had its fair share of critics, such as the traders in Chicago who supported Santelli. Enthused by the ready response from the trading floor, Santelli floated the idea of a “Chicago Tea Party”, echoing the historic Boston Tea Party which marked the beginning of the end of British rule in America.

In no time, the incident became an internet phenomenon as video clippings of Santelli’s outburst spread across hundreds of websites. Within a few days, nearly two million visitors had watched the video on CNBC’s website alone. It became even more popular as a query was raised about Santelli’s remarks at a White House press briefing. White House press secretary Robert Gibbs then questioned the role of television journalists and suggested that Santelli may not be fully aware of the housing plan details. Gibbs then offered to explain the details to Santelli over coffee.

It may be presumptuous to contend that Santelli’s remarks reflect popular sentiment, for the administration continues to enjoy fairly wide support for its efforts to rescue the economy. The wild enthusiasm towards the Obama administration may have turned to “supportive caution”, but the housing package is still a work in progress and it is too early to make a considered assessment. Yet, Santelli did kick off a spirited debate about some aspects of the administration’s bailout plan for the housing sector. And spirited debate is a good thing. That is more than most reporters and editors, not to mention legislators, can wish for these days.

 

Image Credit: Richie Diesterheft under a Creative Commons License

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