I have several posts incubating right now…although I’m not sure exactly why. So, my glorious return to blogging will come through a tried and true set of topics that have frequently made the pages of this blog – politics/economics.
If you have a minute and some interest in what the result of the financial crisis will be in terms of reforming financial regulation, then take a look at this article. In all honesty, it is a bit lengthy and will take you more than a minute, but it is worth the read. Otherwise, I wouldn’t have chosen it for this post.
It is an opinion piece from the FT that goes through some of the political reasons why this bill will be ‘too weak to succeed’ in regulating banks that have become ‘too big to fail’. It seems at best we will have a continuation of the Q1 2009 status quo with a few new acronyms reminding us that there are some new regulatory agencies. The rest of the changes, it seems, took place last winter. These weren’t fundamental changes to regulation, instead we now see a few less bank names in the newspaper because they have either gone out of business or merged.
Don’t get me wrong here. I’m not some vehement anti-Wall Street person. I thought the Wall Street/Main Street distinction that plagued the last election was slightly ridiculous. The point is, and I think this is one that I make frequently, government regulation and institutions shape the world that we live in for the better and the worse.
This is true for the incentives that tax schemes create, regulation of the health insurance industry, and of financial markets and institutions. I found this point in the FT article particularly interesting:
Nor is anyone talking seriously about using antitrust laws to break up the biggest banks – the traditional tonic for any capitalist entity that is “too big to fail”. Five giant Wall Street banks now dominate US finance. If it was in the public’s interest to break up giant oil companies and railroads a century ago, and the mammoth telephone company AT&T, it is not unreasonable to break up the almost infinitely extensive tangles of Citigroup, Bank of America, JPMorgan Chase, Goldman Sachs and Morgan Stanley. No one has offered a clear reason why giant banks are important to the US economy. Logic and experience suggests the reverse.
If, as taxpayers, we are guaranteeing trillions of dollars of bank assets and the viability of something as fickle as a company, we should consider what we are getting into and whether there is a better way to organize that industry.
I’m not an expert on this subject, but I wonder if people who are experts (or even lawmakers) are considering the alternatives. This is just one idea that popped up on the computer screen of a twenty-something student. Where is the debate? I guess…it is not surprising that one ‘pet’ bill is being ushered through, while everyone tries to make their ends meet. I suppose, as the 2008 election showed us, voters want politicians to speak economics and business, but not so much that they lose their average Joe likeability.
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