but one part of his column in today's New York Times caught my attention, and I'd like to focus on it if I may:
We need to focus on four reforms that don’t require new bureaucracies to implement. 1) If a bank is too big to fail, it is too big and needs to be broken up. We can’t risk another trillion-dollar bailout. 2) If your bank’s deposits are federally insured by U.S. taxpayers, you can’t do any proprietary trading with those deposits — period. 3) Derivatives have to be traded on transparent exchanges where we can see if another A.I.G. is building up enormous risk. 4) Finally, an idea from the blogosphere: U.S. congressmen should have to dress like Nascar drivers and wear the logos of all the banks, investment banks, insurance companies and real estate firms that they’re taking money from. The public needs to know.
Let me comment on these points one at a time, at the same time as I also note one other line from the column:
Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.
And what do we get? The best government for the financial services community that their money can buy.
On to the four points.
1) If a bank is too big to fail, it is too big and needs to be broken up. We can’t risk another trillion-dollar bailout.
No organization of any kind - financial, manufacturing, or fraternal - should ever be so large as to totally dominate either its sector or the nation. But someplace along the way we have allowed the idea of preventing monopolies to be whittled away. We have seen it in the concentration of media power, enabled by Michael Powell when he ran the FCC. It is hard to fathom allowing already too big banks to gobble up other financial institutions with the assistance of the US Government. Of course, it is not just Congress that is at fault here. Democratic administrations are as much at fault as are Republican administrations. When the likes of Robert Rubin and Henry Paulson and Tim Geithner and Rahm Emanuel and Bill Daley are in significant position for the making of policy and enforcing - or rather, non-enforcing - of rules on the financial sector, why should we be surprised when their actions have the effect of allowing further concentration of power? Why should we be shocked, shocked, to discover that the administrations in which they serve are reluctant to take the appropriate legal action against the financial bad actors? They profit from the financial sector before they are in government, many will return to it, and some will benefit when they run for public office. And the rest of us? Our taxes go to feather their nests and fatten their portfolios.
2) If your bank’s deposits are federally insured by U.S. taxpayers, you can’t do any proprietary trading with those deposits — period. Gee, sounds like a basic statement of the idea of moral hazard. Too bad that many on Wall Street do not think there is such a thing, but rather believe they should be able to gamble with other people's money and not themselves be held to account. Reinstating Glass Steagall would be a first and necessary step, but it would not be sufficient. If the government is covering risks, the government should have a say. There is an argument to be made for nationalizing the banks. And certainly, as credit unions have demonstrated, it is quite possible to provide the financial services necessary for most people without having to have "masters of the universe" making ridiculous amounts of money, most of which is not taxed as ordinary income.
3) Derivatives have to be traded on transparent exchanges where we can see if another A.I.G. is building up enormous risk. I have a simpler idea - ban most derivatives. Please explain to me what economic benefit they convey to the rest of the economy. They are a device for manufacturing profits for the few. Okay, there are some first level derivatives that may make sense - crop futures, for example. But any derivative needs to be tied to a real underlying asset for it to have any real economic value beyond the ability to gamble with money and hope to draw in enough money from the suckers who will never profit, but thereby provide the profits to the ones running the scam - and too often it is a scam. Hell, at least the Dutch tulip bubble had real flowers behind it.
4) Finally, an idea from the blogosphere: U.S. congressmen should have to dress like Nascar drivers and wear the logos of all the banks, investment banks, insurance companies and real estate firms that they’re taking money from. The public needs to know. Here I think it worthwhile to share s some of the remarks Dean Baker made in an interview with Joshua Holland of Alternet:
The share of the private sector devoted to the narrowly constructed financial sector (investment banking and securities and commodities trading) has quintupled over the last three decades. This means that we're paying five times as much for their services relative to the size of the economy. It is not clear how the productive economy is being better served by this sector now than it was in the '50s and '60s.The financial sector is now disproportionate to the rest of the economy both in its size and profits, and in its political influence. And we see this reinforced in remarks in Friedman's piece that the financial services sector
spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined.
Of course, if we were to apply the idea from the blogosphere, would we not also have to apply it to the Executive branch as well - how much money did Clinton get from Wall Street, etc? How much did Obama? How many of the key appointments in both administrations were from that sector of the economy? What if they all had to wear labels?
We know that will never happen.
Still, when a mainstream voice like Friedman - the winner of three Pulitzers - is willing to put such ideas into his nationally syndicated column, maybe, just maybe, the Overton Window is moving a wee bit in a positive reaction?
Just a few random remarks on a Sunday evening.
Make of this what you will.
Peace? I don't think so.