Today's 'Culture of Poverty'

For decades, social scientists, policy wonks and politicians have studied and debated what's come to be known as the culture of poverty. The consensus: a class of Americans is set apart from the mainstream by geography, class and income. Its members adhere to norms that don't apply to the rest of society, and engage in self-destructive behavior that imposes significant costs on the nation at large. The culture of poverty has made for potent politics (remember Ronald Reagan's fictitious welfare queen?) and spawned best-selling polemics from the right (Charles Murray) to the left (Jonathan Kozol).

We don't hear as much about the culture of poverty these days. Perhaps it's because the market turmoil is making us all feel a little poorer. Or perhaps it's because a highly visible group is now exhibiting all the outward appearances of the underclass: the overclass. Forget welfare queens and the culture of poverty. Think Wall Street kings and the culture of affluence.

Wall Street types don't live in ghettos, barrios or the hollows of Appalachia, but they do inhabit environments that are sealed off socially from the rest of the world—the Hamptons on Long Island; Fifth Avenue; Greenwich, Conn. Because they rarely interact with people of middle-class means (save the odd doctor, lawyer or interior designer), they have become woefully out of touch with the solid bourgeois values that made America great.

In the underclass, unmarried young fathers don't take responsibility for their children. In the overclass, twice-married, middle-aged Wall Street daddies don't own up to the consequences of their insane financial miscues. Wall Street titans are almost incapable of seeing the problem with taking nine-figure payouts in years in which their stocks plummet. "There's just a total disconnect between the compensation and the responsibility for their actions," says William Cohan, a former Lazard banker turned author.

In his book "The Age of Abundance," libertarian author Brink Lindsey boils down the difference between the desperately poor and the blissfully rich to an ability to focus on the long term. "Members of the underclass operate within such narrow time horizons and circles of trust that their lives are plagued by chronic chaos and dysfunction," he says. By contrast, he says, elites are well-organized long-term thinkers. Riiiiight. "Modern Wall Street is a system," says Charles Morris—a former Chase banker and author of "The Trillion Dollar Meltdown"—"that rewards crazy risk-taking in the short term without regard for the long-term consequences."

Critics point to a pervasive sense of victimhood in the underclass. But listen to what Bear Stearns CEO Alan Schwartz told the troops after his firm succumbed to wounds that were almost entirely self-inflicted. "We here are a collective victim of violence," he said. Yep, just another case of the Man keeping the Man down.

Conservative critics constantly carp that the culture of poverty has encouraged a sense of dependency on Washington. Of course, in recent months, the bureaucracy—the Federal Reserve, the Federal Housing Authority, Fannie Mae and Freddie Mac—has generally ignored the struggles of poor homeowners. Yet it vaulted into action to save the bankers from their own disastrous bets. When Bear Stearns, the nation's fifth largest investment bank, approached insolvency, the Feds orchestrated JPMorgan's acquisition of it.

In 1993, the late senator Daniel Patrick Moynihan coined the term "defining deviancy down." The prevalence of bad behavior in the underclass, he argued, caused institutions to lower standards and expectations, which effectively socialized the costs of dysfunction. Today, the Federal Reserve is "defining solvency down."

In recent weeks, the Fed has responded to Wall Street's crisis by systematically lowering the standards of what it would accept as collateral for loans. (Historically, only government bonds or bonds backed by Fannie Mae and Freddie Mac were good enough.) But as part of the Bear Stearns deal, it agreed to lend $30 billion against assets of dubious provenance.And guess who bears the risk if that $30 billion can't be paid back? You and me. If write-downs continue, rumor has it, the Fed might start accepting sports memorabilia, Beanie Babies and Pokémon card collections as collateral.

There are important differences between the underclass and the overclass, notes Susan Mayer, dean of the University of Chicago's Harris School of Public Policy Studies. The overclass is better connected, and it can cause more damage. "Poor inner-city kids selling drugs to suburban kids can harm people," Mayer says. "But financial markets can bring thousands and thousands of people to ruin."

The pernicious culture of affluence merits further study. When self-proclaimed rogue sociologist Sudhir Venkatesh sought to learn about the culture of poverty, he hung out in Chicago's notorious Robert Taylor Homes and befriended drug dealers. The tale is chronicled in his fascinating book "Gang Leader for a Day."

If he really wants to understand the workings of the dysfunctional class that's threatening American values and taxing national resources, Venkatesh, who teaches at Columbia, should move into a co-op on the Upper East Side and get a job on Morgan Stanley's trading desk. He can call it "Hedge-Fund Manager for a Day."