If you live long enough, you get to see lots of things you thought you would never see. Conservative writers supporting breaking up the banks is one of those things. From Goerge Will.
In a sense, TBTF began under Ronald Reagan with the 1984 rescue of Continental Illinois, then the seventh-largest bank. In 2011, the four biggest U.S. banks (JPMorgan Chase, Bank of America, Citigroup and Wells Fargo) had 40 percent of all federally insured deposits. Today, the 5,500 community banks have 12 percent of the banking industry’s assets. The 12 banks with $250 billion to $2.3 trillion in assets total 69 percent. The 20 largest banks’ assets total 84.5 percent of the nation’s gross domestic product.
Such banks have become bigger, relative to the economy, since the financial crisis began, and they are not the only economic entities to do so. Last year, the Economist reported that in the past 15 years the combined assets of the 50 largest U.S. companies had risen from around 70 percent of GDP to around 130 percent. And banks are not the only entities designated TBTF because they are “systemically important.” General Motors supposedly required a bailout because a chain of parts suppliers might have failed with it…..
By breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together. Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. Dismantling them would be a blow against government that has become too big not to fail. Aux barricades!
Will is now supporting the bill passed unanimously in the Senate that will direct the GAO to look at whether or not TBTF banks have an economic advantage in terms of their borrowing costs due to their implicit guarantees from the government. As those who read across the spectrum know, their exists a body of literature which suggests that economies of scale are nonexistent once they reach a certain size, probably somewhere between $100 billion and $500 billion. (There are also some studies suggesting otherwise.) This literature has been discussed for years by economists like Simon Johnson and others on the left. Now, we have conservatives like Vitter and DeMint supporting the idea of breaking up the big banks.
How this happened I am not quite sure. I suspect that part of this change of heart comes because they have found a way to blame government for these banks being too big. To be fair, that is partially true. Banks have gotten bigger since the economic crisis as healthier banks were coerced, sometimes, into absorbing some of the weaker banks. Yet, even before the crisis those banks were too large, leading to the perception that they needed to be saved to stop the banking system from collapsing. Remember the record TED spreads at the time. Going forward, there were many calls from the left to break up the banks, and the right defended their size. Now that it can be blamed upon government, it appears to be ok to break them up. You know what? I’ll take it. It is the right thing to do. Whatever really lead to this change of mind, I can only speculate, we should hope that this can lead to the kind of reform we should have had when Dodd-Frank was passed. Break up the big banks. While not a perfect solution, it is one that takes away many of the incentives that existed to cause our subprime crisis. It provides the kind of bright line rule that will be less susceptible to regulatory capture. Let’s just hope that this is more than some passing fancy.
Steve2: Nicely put–”now that it can be blamed on the government, it appears to be ok to break them up.” I think you’ve nailed it, and I’m with you as well on “I’ll take it.” If all else fails, perhaps the President can send in the drones…
Steve offers no links to support his assertion about conservatives and you happily jump about his straw man driven wagon with hearty “atta boys.” Steve is addicted to straw man arguments, inserting them deftly whenever he can. Of course, to Steve they aren’t straw man arguments as he is the arbiter of all that is right and true. You’ll make a good lap dog for him if you keep up this performance.
Two links that show Steve is wrong about conservatives (not that he cares. He needs a boogey man to be a straw man.)
http://usconservatives.about.com/od/corporatebailoutsof2008/f/BailoutFAQ2.htm
Conservatives, who mostly favor free markets, believe that by allowing banks, hedge funds and the pension funds that hold them to succeed or fail on their own, the market self-corrects itself in favor of successful practices and in opposition to practices that don’t work.
I.E. conservatives would have allowed the banks to fail when they were bailed out.
http://www.nytimes.com/2008/09/27/business/27repubs.html?_r=0
The seeds of the House Republican revolt over the financial industry bailout were sown in an e-mail message circulated Monday night as internal animosity built quickly over the Bush administration’s request for $700 billion to prevent an economic collapse.
Doesn’t sound like a lot of support for big banks by conservatives.
Quick, turn the other way! Reality is coming around the corner.
I like this exchange at yahoo answers:
Why didn’t conservatives complain about the bank bailouts?
As I recall, polling data showed that up to 97% of Americans were against the first bank bailout bill in 2008, and Congress just passed it anyways. So I’m not sure how to answer your question. I guess the conservatives in Fantasy Land are different from the conservatives in Reality, which is where I live.
You should probably close your eyes and direct this question to the Fantasy Cons, who only exist in your mind and on cable news.
I doubt the figures are accurate, but the message is one you and steve should heed.
DADvocate: I’ll let Steve defend his own post if he cares to. I will point out that, given your previous complaint that I don’t seem willing to engage in serious discussion–a complaint I answered at length without any response from you–you might consider that calling someone a “lap dog” is not necessarily the best way to invite the conversation you claim to want. Actually, name-calling of any sort isn’t very helpful. (And yes, I’m aware I lost my cool and did just that recently with H.M.; but I also apologized for it.)
1)- It was Bush and Paulson who were in charge when the banks were bailed out. Lots of conservatives voted for TARP. Link shows the actual votes. I guess you can claim that Paul Ryan, Tom Coburn, Eric Cantor and Grassley are not real conservatives, but I am kind of tired of that argument.
http://www.votetrackers.com
2) If what you are really claiming is that conservatives are not supporting breaking up big banks now……
http://www.politico.com/story/2013/01/vitter-20-senators-comeback-could-vault-him-to-governors-race-86835_Page2.html
“Vitter has led the charge among Republicans to take on Wall Street’s megabanks, using his Banking Committee seat to accuse Congress of failing to right the wrongs that led to banks getting multibillion-dollar taxpayer bailouts during the 2008 financial crisis.
He has gone beyond hectoring officials about bailouts and delved into wonky policy topics, such as pressuring regulators to toughen up new capital requirements that large banks are lobbying to water down.
Last session, Vitter grabbed headlines by reaching across the aisle — and way across the political spectrum — to partner with Ohio Democrat Sherrod Brown, one of the Senate’s leading advocates for paring back the size of financial institutions.
Together, the populist partnership scored a symbolic victory in December, when the Senate passed their bill to require a Government Accountability Office audit into whether big banks continue to benefit from a perception that — in a crisis — the government would once again rescue them from ruin.”
3) All of this is besides the point. I never said that conservatives supported bailing out the banks, though many did. My claim is that they opposed breaking up the big banks. Much different.
Steve
Anyway, it is getting all too easy to respond to any negative comment about conservatives with “the people who do that aren’t real conservatives anyway.” Define “real” conservatives as people who don’t do anything imprudent and don’t engage in crony capitalism, and your argument become unassailable.
“Define “real” conservatives as people who don’t do anything imprudent and don’t engage in crony capitalism, and your argument become unassailable.”
But that’s kind of the point though. It’s easy to define conservative principles and note who follows them and who doesn’t. Free market economy is contrary to crony capitalism, because in free market economy the government does not give away special tax rates or handouts to businesses. Good luck defining a real liberal.
When I read this type of articles, I always ask same questions… Is Medicare too large to fail, and should we break it up? How about Social Security? Or Medicaid? And let’s not forget than the lion share of the bank bailout went to the GSEs – Fannie and Fraddie (who can forget Jamie Gorelick, the one who so stupidly built a wall that prevented the law enforcement to stop 911 hijackers, also was involved in the GSEs). And over-all, if too-big-to-fail is bad, shouldn’t we divert non-military federal government tasks to individual states? I also wonder why this single thought never enters the minds of our liberals.
And while we are at it, shouldn’t we assume that the 16 trillion (and counting) debt of the federal government is a much bigger scandal than all the trifle little things that all the Us banks did? I mean, our unfunded federal liability make Ponzi schemes look honest and actually solvent.
Makes sense. The US military spends more than most of the rest of the world’s militaries put together. They should be broken up. How about the dollar? It is the de facto world currency. That should be broken up also.
“When I read this type of articles, I always ask same questions… Is Medicare too large to fail, and should we break it up?”
Is that because you dont want to deal with the issue? Think their size is ok? Don’t care? Do you believe that if we have to deal withone thing that is too large, we must also deal with everything else you consider too large at the same time?
“And while we are at it, shouldn’t we assume that the 16 trillion (and counting) debt of the federal government is a much bigger scandal than all the trifle little things that all the Us banks did?”
Credit markets froze, we had record TED spreads when the banks started to collapse. With 16 trillion in debt, the bond market hovers near record lows.
Steve
The main reason liberals are more comforrtable with Big Government than with Big Business is that none of us got to vote for the people who run Big Business.
“The main reason liberals are more comforrtable with Big Government than with Big Business is that none of us got to vote for the people who run Big Business.”
On the contrary, my friend. I don’t elect people who run EPA, Labor Department or Department of Energy. Even my vote for the president is pretty much irrelevant. But if I don’t like “big business”, I can simply decide not to deal with it – and then it does not exist for me, because I fired the entire company. Now, I cannot simply ignore all the stupidities of the federal government, I cannot simply show the middle finger to the IRS if I don’t like the tax rate – like I can show middle finger to Nike. Simple as that.
HA: Not everyone is a big fan of representative democracy, and apparently that includes you–which is fine, that’s your right, and you don’t have to vote if you think your vote doesn’t matter. Regardless, while you don’t “elect people who run EPA” etc. you do elect the people who appoint them and the people who oversee them, which is why the EPA under George Bush was not the same as the EPA under Barack Obama. Elections do matter, and government has a role to play. You can, as you say, show your middle finger to Nike–but try doing that if there’s no government to keep Nike from monopolizing the market. Try taking your business elsewhere if you live in a town with one grocery store, or one pharmacy, or a box store that’s put all the local independent stores out of business. Government does a lot of things that you might not notice or appreciate to keep businesses from being even more predatory than they are. It also does a lot of things wrong, no question about that…
“Not everyone is a big fan of representative democracy, and apparently that includes you”
US is a Constitutional Republic, not a democracy. And yes, we elect our government and it’s all fine and dandy. Moreover, you seem to make conclusions about my views irrespective of what I right. I support elections – but I note that elections give me VERY limited control over my own destiny. I am just one vote out of 100 million. Clearly, I have more more control over my dealing with Nike (or any other corporation) than I have over the US federal, state and local government. If I don’t like Nike’s prices or quality I simply fire them and buy sneakers from another store. I surely don’t have that much power over IRS or EPA, not even close.
“Try taking your business elsewhere if you live in a town with one grocery store, or one pharmacy, or a box store that’s put all the local independent stores out of business. ”
Surely you realize that I have much more flexibility in moving my business elsewhere than changing the tax rate or changing the labor regulations. Why can’t you see the obvious?
“You can, as you say, show your middle finger to Nike–but try doing that if there’s no government to keep Nike from monopolizing the market.”
M-kay. Tell me, when was Nike close to become a monopoly in the sneakers’ business. If you cannot – then your point is baseless. And yet again, you still don’t want to concede that I have more control over my relationship with Nike than my relationship with IRS. Why?
“Elections do matter, and government has a role to play.”
Stupid and stupid. My vote matters very little and surely government has a role to play. But that does not contradict my claim that I have much, much more control over my interaction with Nike than with IRS. That’s a rather simple and straightforward point, I wonder why it is so difficult for you to understand it.
HA: I concede, sir. You do indeed have more control over your relationship with Nike or any other retailer than you do over your relationship with the IRS, nor did I claim otherwise (you could read my post again to confirm that); I was just trying to point out that (a) the electoral process is not inconsequential and (b) the government has played and continues to play a legitimate role in making sure the market does not run amok. Thank you for reminding me of the proper term, “Constitutional republic” for this here “fine and dandy” government of ours. I apologize if I leaped to conclusions about your views–honestly, HA, you just didn’t sound like a big fan of the whole “we the people” idea, and your “fine and dandy” also seems kind of, I don’t know, dismissive of it. But yes, you are in fact just one vote out of 100 million or whatever (like me–see, we’ve got that in common!), whereas in most cases you can take your commerce elsewhere, so that gives you better leverage in the marketplace than at the polls (like me again!). You got me there, my friend. The point I was trying to make, clumsily, was that government has helped create and preserve some of that leverage, by keeping companies honest and preventing them from becoming monopolies–something that did happen in the past until laws and regulations were passed to curtail it. Now, when I make the simple statement that “Elections do matter and government has a role to play,” I’m just not sure what provokes you to reply “Stupid and stupid.” For one thing, HA, that’s just not very polite. You seem kind of ill-tempered, or perhaps I’m just oversensitive. Anyway, I’m just trying to offer a mild antidote to what I take to be your anti-government venom (and from what you’ve said about your background, I’m sure you have plenty of reason to be suspicious of government). I’m sorry I’m so stupid. Be patient with me, HA–I’m a work in progress (I hope).
you get to see lots of things you thought you would never see.
This is because you spend much more time looking at your preconceptions than reality.