Breaking up the Big Banks
My biggest concern about the PPIP approach to the banking system is that even if it works, what it does essentially is return us to the pre-crisis status quo—banks that are so large that they’re too politically powerful to regulate effective and too systemically important to be allowed to fail. That’s a recipe for dishonest transactions that produce short-term profits at the cost of blowups. One appealing element of nationalization is that it can easily be made to end in a world in which there is no institution named “Bank of America” or “Citi” and no such gigantic institution. That said, the PPIP approach doesn’t preclude taking a hammer to the institutions. And as Simon Johnson says something has to be done:
In any case, our top political leadership needs to really sell some version of the following message. We let the banks get out of control and the cost will be enormous; our debt/GDP ratio will in all likelihood rise from around 40% to over 80%. We cannot afford to have the same problem again. We must break the power of banks before they break us all. And if you don’t think banks can do that much damage to economies, just look around outside the United States – the world is full of countries where growth is slowed or distorted by a financial system that becomes too powerful. This is not about tweaking the existing U.S. regulatory system; it is about complete change and – in many senses – turning back the clock to a financial system that was simpler, smaller, and much less dangerous.
Unfortunately, I thus far see relatively little indication that the administration is thinking along these lines. Instead, they seem to me to be inclined to remain living in a world populated with banks that are “too big to fail” and “too complicated to nationalize” but try to somehow regulate them better. This is, I think, a strategy doomed to failure over the long run.
80 Responses to “Breaking up the Big Banks”
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March 23rd, 2009 at 3:46 pm
Let’s seeeee now.
Who did ObaMmmmMmmmGood appoint to oversee his bailout?
And which Monopoly Street gave him all those millions?
And just what about his past tells us that his “populism” is anything more than glib Bushit? Rezco?
Don’t you think his laughter on 60 Minutes speaks to what’s really going on in his head?
Without his teleprompter he just couldn’t keep his snickering repressed.
He giggles away thinking “Just how stupid are they?!”
March 23rd, 2009 at 3:48 pm
I don’t know, with the exception of this little hiccup and the Great Depression, I think this model has worked fairly well. Just what would you propose, something along the lines of a European nation — nations that have spent nearly a century trailing the U.S. economically and financially?
Really guys, let’s all take a deep breath and think before we act. What you get may not be what you wanted to begin with.
March 23rd, 2009 at 3:49 pm
Exactly. What amazes me is that no journalists are asking that question: Moving forward, how are we going to prevent any institution from becoming too big to fail?
March 23rd, 2009 at 3:51 pm
“We let the banks get out of control and the cost will be enormous; our debt/GDP ratio will in all likelihood rise from around 40% to over 80%. ”
Is that a joke? That rise in spending is thanks to all of the progressive programs that are going into place–at least according to the hallowed CBO. The financial industry is a drop in the bucket.
If the government plays their cards right with Citi and some of these other companies, they might actually be able to finance some the ruinous spending that we’re going to be doing over the next 3 years.
March 23rd, 2009 at 3:52 pm
Ed Smithe, what do you mean exactly by “this model”? Since WWII the American model was working just fine with relatively small and regulated banks and financial institutions.
Only recently this “model” has become a giant scam perpetrated in total impunity by CEOs of a few supergigabankfunds and their lobbyists in Washington.
March 23rd, 2009 at 3:57 pm
Exactly. What amazes me is that no journalists are asking that question: Moving forward, how are we going to prevent any institution from becoming too big to fail?
.
Stop them from merging with some other corp. every other year.
March 23rd, 2009 at 4:04 pm
Unfortunately, I thus far see relatively little indication that the administration is thinking along these lines.
I counsel patience. These people (the administration, that is) aren’t idiots, and I don’t think they’re corrupt, either, as many accuse them of being. And I’d be very surprised if Congress didn’t at some point exercise its investigatory powers to probe the causes of the crisis. Excessive bank size will be an issue that gets discussed, and hopefully acted on via legislation. And if, in the fullness of time, enough people determine that the issue is sufficiently important, and Obama continues to ignore it (or refuses to cooperate with Democrats in Congress to address it), a primary challenge can always be mounted in 2012. I’m completely serious.
March 23rd, 2009 at 4:06 pm
Matt, I don’t see why size is such an issue. In every other industry there are real gains to be made by economies of scale, and I see no good reason why finance should be excluded from these benefits. The big banks failed because they took out and sold a lot of stupid and risky loans. But I’m not convinced that there is any clear connection between the size of the banks and the size of the stupidity. If anything, the relation is converse to your worry: they got so big because they were so stupid (collateralizing hugely risky obligations for the sake of humongous returns), not the other way around.
March 23rd, 2009 at 4:07 pm
Why oh why?
Do you really think that there weren’t financial behemoths driving the post World War II? Are you telling me that JP Morgan just appeared in the last 20 years?
You guys have a warped view of “back in the day.” True the banks may have been smaller, but that’s a relative thing. Frankly, banks like JP Morgan probably had more control that Citi does today.
Also, your incredibly regulated system almost tanked in 1974–but no one would know that, because the banks themselves figured it out…and we all lived happily ever after.
March 23rd, 2009 at 4:10 pm
But Matt, in the long run, we’ll all be dead.
Or had you forgotten?
Seriously, I’m inclined to agree with you on these matters, but it seems to me that the critical judgements to be made about the banking plan right now must be: 1. Will it work, 2. Can it be implemented (ie, Congressional approval?), and 3. How much will it cost us (the taxpayer) – and can it be done for any less?
Trying to prevent the NEXT financial collapse is an admirable goal, but don’t you think that’s something that can only be accomplished slowly (if at all) by (for example) gradually putting up roadblocks to bank consolidation and risky behaviour, while increasing incentives for bank spin-offs and safe investment? You didn’t honestly expect Obama/Geithner to roll out a plan that would solve all these problems at once, did you? And if they had (including many nationalizations, etc.), don’t you see that a shock to the system that big would almost certainly have been too much for Wall St. to bear – and cutting off our nose to spite our face would be really bad policy.
Perhaps I’m just being naive, but I think the plan is about as good as we could hope to get right now. In fact, if they supplement it with a sudden takeover of Citibank and BoA, I’d pretty much say they’d aced this test.
March 23rd, 2009 at 4:16 pm
” banks that are so large that they’re too politically powerful to regulate ”
A problem we have had with all large government programs. What did the progressives do last time an entitlement program got out of hand? Not much? Well,then the problem is government solutions in general, not this particular government solution. Reform Congress or get out of the government insurance business.
March 23rd, 2009 at 4:17 pm
Instead, they seem to me to be inclined to remain living in a world populated with banks that are “too big to fail” and “too complicated to nationalize” but try to somehow regulate them better
To a certain extent, this is a global problem and that might explain the reticence of Treasury to immediately tackle this. The U.S. has large financial institutions but they are by no means unique. Other countries have their giant hydra headed institutions as well. The fix might be new regulations that either prevent banks from growing as big or else make it impractical to run financial Walmarts with existing amount of risk/leverage. I think this will take longer because it will be exceeding difficult to come up with a new set of “one-size-fits-all” regulation. There will have to some minimal coordination with other countries as well.
March 23rd, 2009 at 4:21 pm
Ed,
Yes, financial behemoths have gotten bigger. Why don’t you google Glass-Steagall, for example. And I am in fact telling you JPMorgan Chase did just appear, in 2000 when Chase Bank aquired J.P. Morgan & Co. I could on and on, but you’re either an idiot or a troll.
March 23rd, 2009 at 4:22 pm
Actually Matt, the Group of Thirty Report (chaired by Volcker and with both Geithner and Summers as members) suggests having limits on the size of banks.
I don’t think we have a clear indication of where the larger financial regulation is going, but I do think it is clear that at the very least the new regulations will make it very onerous to grow too big.
March 23rd, 2009 at 4:30 pm
This is the main public policy point, I think. Geithner’s plan enriches the wrong folks at taxpayer expense and leaves a fundamentally corrupt system in place.
The notion that Congress or this administration, once good times return, will turn “back the clock to a financial system that was simpler, smaller, and much less dangerous” is ludicrous.
March 23rd, 2009 at 4:31 pm
Paulie,
Why don’t you go on and on…And while you’re at it, why don’t you tell me the relative size (and power) of JP Morgan in 1946 vs. the JP Morgan(Chase) of today. What I think you will find is that relatively speaking, JP Morgan was as, if not more powerful in 1946 than it was today. Much of that has to do with the reality that we live in a globalized world where its not just US based institutions that these banks are competing with, but foreign institutions many of which don’t live under Glass-Steagal. Or, did you happen to read that in the law?
So no, I’m not an idiot, and no, I’m not a troll either…so long as individuals like yourself can’t come up with arguments that defeat mine. Your argument in particular is weak, especially as a semantical argument…and furthermore demonstrates absolutely no knowledge of history. I suppose the next thing you’ll be telling me is how antitrust legislation has succeeded in making petrol more affordable now that a company like Standard Oil can’t exist anymore.
March 23rd, 2009 at 4:34 pm
i think I have reached the point where if the market responds favorably to a plan it can only mean that “it” believes that the american taxpayer will be scammed to the benefit of wall street. I know that is cynical, but what evidence to the contrary is there? There were significant profits made during the run up of this bubble, and either those profits will be kept to the detriment of the taxpayer, or they will be sought to the detriment of the investor. I do beleive it to be a zero sum game!
The government must recognize that too large to fail can n ot be allowed, and all the banks being bailed out MUST be forced to sell off business parts (by nationalzation or other methods) so that they can become small enough to fail and thus forced to live under normal business models. Anything less is nothing other than a continuation (of the past 20 years) of the redsitribution of wealth from the middle class to the rich.
March 23rd, 2009 at 4:36 pm
If things look like they aren’t working and we need to nationalize them, the usurious payday loans, often marketed as “direct deposit advance” loans and the like, could be clawed back by regulation or otherwise from their ridiculously sky-high and economy-disrupting (and thus national security-disrupting) APRs to the prime rate minus an usury penalty, thus rendering the offenders insolvent and in need of more rescue. That would be a fair issue on which to dismiss executives — they have been enriching their bonuses on the backs of the poor with those very high APRs for a long time.
March 23rd, 2009 at 4:44 pm
Alan,
That’s a pretty cynical view of the millions of Americans, like myself, that invest in the market. I don’t think the taxpayer is being scammed–especially as the taxpayer stands to gain quite a bit of money should the government play its cards right.
Tell me, what do you think of Social Security. Is Social Security your idea of an honest system?
March 23rd, 2009 at 4:49 pm
Tell me, what do you think of Social Security. Is Social Security your idea of an honest system?
It’s too bad the Republicans didn’t get their away and invest old people’s Social Secruity money in the market because now it would be all gone and old people could live life to the fullest as envisioned by Charles Murray and eat dog food and live in cardboard boxes.
March 23rd, 2009 at 4:51 pm
And I’d pretty much say the plan is designed to make certain that will NEVER happen.
March 23rd, 2009 at 4:56 pm
“as the taxpayer stands to gain quite a bit of money should the government play its cards right.”
The market cap for Citibank is about $250 billion. We would be doing fantastic if we earned that entire market cap. But, according to the CBO, the deficits we run will likely result in an additional $450 billion/year debt service in a few years (5% interest on $9 trillion). The taxpayer has already lost on the deal. If everything goes according to rosy plans, then the best we will due is pay about a third of the federal budget on interest payments.
March 23rd, 2009 at 5:16 pm
You mean other than two massive meltdowns in less than a century? And that’s not even covering the slightly more minor meltdowns like the S&L fiasco, or the fallout from the Latin American debt? And to scare us you bring up Europe? Because it’s like the Donner party over there?
If the worst case scenario of regulation is that we end up like Europe, and the worst case scenario of no regulation is that we end up like Iceland, then it’s an easy choice.
March 23rd, 2009 at 5:17 pm
Ed,
J.P Morgan wasn’t that big in 1946. Glass-Steagall forced it to spin off its investment banking, which became Morgan Stanley. It didn’t get at all big until it merged with Guaranty Trust Co in 1959. At the time of the merger, Guaranty Trust Co. was four times its size. It was basically a mid-size bank in 1946. Point being, regulation has worked in the best to keep banks from becoming too large. You don’t know what you’re talking about.
March 23rd, 2009 at 5:27 pm
Shorter Ed: that iceberg was just a hiccup, the Titanic is a fantastic ship much more reliable than those tiny lifeboats.
It would difficult to write a better parody than Ed’s praise of the fabulous post-2000 financial system, in the middle of this mess.
March 23rd, 2009 at 5:29 pm
Pedro,
I didn’t realize that folks that live on Social Security were living so well. Maybe we should tax them some more to help pay for health care for younger people.
daveNYC,
I brought up Europe because Europe has played a subservient role to the United States during that period. A big reason why is because they don’t take this stuff seriously. I don’t know about you, but I don’t take for granted the fact that we’re the lender of last resort. If you progressives haven’t noticed, being the lender of last resort allows you to do all kinds of really stupid things like run your debt to GDP ratio up to 80% in the next ten years, because some one out there (China) is willing to finance it. Or are they willing to finance it?
For real answers (especially on today’s announcement), consult this blog…
http://ashtonadvisory.blogspot.com/
Hell, as a question or two since the both of you are so wise. Maybe the author (a friend of mine) might have a thing or two to learn.
March 23rd, 2009 at 5:36 pm
Ed,
My friend runs a blog too, just follow the link above.
March 23rd, 2009 at 5:40 pm
Why oh Why,
Three years down the road, I don’t think that your criticisms are going to amount to a hill of beans. And if they do, then a Republican will be President. Do you really think that the system is going to be broken in 3 years? How about next year? You guys are totally incapable of looking beyond a days worth of headlines…Maybe that’s why you hate private investors so much…because we’ve figured out that the best way to make money is betting that America will be more successful in the future than it was in the past. Your strategy, betting against private industry, isn’t a long-term winner.
Paulie,
I went through this before. Name me five international banks that were as large (and as influential) as JP Morgan. Moreover, if Guaranty Trust Company was such a powerful institution in comparison to JP Morgan, then why was JP Morgan listed as the buyer?
Maybe the lesson that you guys need to learn is that money ain’t everything.
I look forward to your learned analysis.
March 23rd, 2009 at 5:41 pm
Paulie,
I shall. Many thanks.
March 23rd, 2009 at 5:41 pm
ed,
I do think that social security is a valuable and reasonable policy, one tht offers much social value at little societal cost. It is not a scam in the least, except when people pretend that it would work better if we left that money to the interests of wall street so that they could use it more efficiently than the government! my problem with the current plan to rescue the banks is simply that the “expert bankers” involved sold out long term value for their own short term gain thus disqualifying them from being indespensible to our society. (they already put themselves ahead of national interest, why would we expect them to look out for us now?)
In addition, i think the speculating portion of the stock market is so desirous of seeing their world view con that the market can only go up be vindicated that they jump on any news as confirming that (wrong I believe) view. Thus , when the market goes up, it is because speculators (not long term investors approve. Long term investors , if they thought the market was such a good deal, thought so when the market was 7000, not more so when it hits 7500.)
The banks , by leveraging these loans , took very risky bets with yours and my IRA’s and 401ks, and now that they lost that bet, are telling us that we NEED them to keep our economy going. We DO need banks, but we don’t need the particular bankers who have proffitted so unreasonably these past 10 years. Yes it was legal, but mostly because these bankers lobbied to make it so (deregualtion, government impedes economic growth, etc..). Like Madoff, they can’t hope to keep their houses AND have the government repay their stockholders, at least one of them is going to have to lose their shirts.
If a bank is too big to fail, then it should by default be nationalized (once so thoroughly mismanaged that it in fact is failing) and run by the government in the name of national interest and sold off into smaller parts that will then be subject to the same rules of commerce as the rest of the businesses that are not “Too big to fail”. I see little value to the size of these banks to our society, but apparently much value to the stockholders, as they have purchased businesses that the government will/must protect at all costs. if that is so,, why shouldn’t we all own it, and make sur ethat such companies operate for long term national needs as opposed to a few persons short term profits!
March 23rd, 2009 at 5:44 pm
Ed -
You have the facts almost exactly backward. A heavily consolidated banking industry is the European model (think Deutschebank, Credit Suisse, UBS, BNP, Credit Agricole, Barings, ABN, etc). The American model was, until very recently, very decentralized.
Even now, we have 8000 banks, but before deregulation began to take hold in the late 1970s, we had twice as many. New York has 1/4 the banks it had then. Sure, there were seven or eight money center banks that were systemically important (see Continental Illinois), but their operations were tightly regulated, and none of them had anywhere near the weight that JP Morgan Chase, BofA, Citi, and Wells have today. Those four banks have 2/3 of the assets in the entire banking system. There’s no historical precedent for that in the United States.
I can’t tell if you mean well, but this isn’t the first time you’ve introduced wildly incorrect information into a comment thread. You should expand your reading horizons beyond your friend’s blog.
March 23rd, 2009 at 5:48 pm
Maybe that’s why you hate private investors so much…because we’ve figured out that the best way to make money is betting that America will be more successful in the future than it was in the past. Your strategy, betting against private industry, isn’t a long-term winner.
What the hell are you babbling about? We’re comparing financial regulation as it existed for most of post-WWII to the post-2000 system that just exploded.
And nothing could be further from “private industry” than the current giant zombie banks only surviving because of implicit government protection and hundreds of billions of taxpayer dollars.
Some private industry you got there, “Mr Investor”.
March 23rd, 2009 at 5:48 pm
Alan,
Define “much social value at little societal cost.”
As for it being a scam. Let’s see. Social Security, in, how many years is it again?…is going to go broke. Why is it going to go broke? Because Alan, it’s a Ponzi scheme. Moreover, that money isn’t put aside, not to be touched…That money is spent by the politicians, Republicans and Democrats, and we’re issued IOUs.
When I turn 65, what will I get. Well, considering the fact that it’s going broke, the new age is 67. By the time I make it there, it might be 70+. What is your definition of a scam again?
Perhaps the only thing that social security doesn’t have, that most every scam does, is a willing victim. In this case, there are no willing victims, just victims that have no choice as to how the government pisses away their money.
Say what you want about the stock market…It’s your CHOICE not to invest in it and either succumb to inflation or the paltry return of the SS ponzi scheme.
But please, don’t tell me that a program, who’s history goes back to Bismarck and his attempts to raise an army by promising something that probably wouldn’t be delivered, isn’t a scam.
March 23rd, 2009 at 5:49 pm
Why oh why,
Yesterday it looked bad, today it looks better. Five years from now it looks even better.
You need to stop living in the moment and start thinking about the future for a change.
March 23rd, 2009 at 5:52 pm
Brendan,
That’s my point. Given that Europe heavily consolidated their banking sector, what did it get them? A back seat to the U.S. There’s a reason for that, and personally, I don’t want to repeat it…especially as the world is far more cutthroat today than it was 40 or 50 years ago.
I do mean well, and I don’t claim to have all the answers. But I think that the record will show that I’ve been far more right than I have been wrong.
March 23rd, 2009 at 5:57 pm
Ed -
So you’re for or against a consolidated banking industry? MYglesias wants to break up the big banks and go back to the old American model. I think that’s a good idea. From your comments, I thought you opposed it. Now, I can’t tell.
March 23rd, 2009 at 5:59 pm
C might still have to be sacrificed. That won’t be until GS limits as much as possible any exposure they might have from such a failure and making the bets against it when the time comes.
They will tell Tim when to pull the plug if and when the time comes.
If you want to speculate against economic doomsday you can’t do better than GS. Well even if it’s economic doomsday they should win. They do run the Treasury after all. They know what Gaithner is going to do before Tim himself even knows. They are ready for all contingencies. Luck favors the prepared mind as they say.
If you get depressed about the Pigmen always winning then you should do an emotional hedge. Buy GS. What’s bad for you is good for GS after all. When you read about the latest atrocity out of Wall Street you can look at your portfolio and be happy. On the other hand if you see Hank Paulson being dragged to the gallows by an angry mob your stock will be worthless but you can be happy that justice was done.
March 23rd, 2009 at 6:04 pm
Brendan,
Apologies, I should have been more clear (and may have made a mistake in answering your previous question).
What I am for is smarter regulations…but not an arbitrary jump to “break-up” the banks. If the banks would like to break up on their own…that’s fine with me. But the government should not push for a more diversified/smaller model, because I think that we need large institutions to ensure that US business has the tools to compete in a globalized world.
March 23rd, 2009 at 6:07 pm
On a lark, I went and pulled some 10-Ks and compared them to the aggregate industry data from the FDIC’s Historical Statistics on Banking (HSOB).
The oldest 10-K I could find on the JP Morgan site was for predecessor company Chemical Bank in 1994. It had just finished acquiring Manufacturers Hanover, and together they had $149 billion in assets. In 1994, the HSOB statistics show just over $4 trillion in assets for all FDIC-insured commercial banks in aggregate. So Chemical Bank, a large, important bank had about 3.5% market share, by assets, in 1994.
Today, JP Morgan Chase has over $2.1 trillion in assets, while the aggregate number has grown to about $12 trillion. JP Morgan Chase is one of four banks that have nearly 20% market share by assets.
I think that’s a huge problem.
March 23rd, 2009 at 6:09 pm
Ed,
Well played troll. You’ve moved in a complete circle and gotten us to follow.
March 23rd, 2009 at 6:10 pm
I think that banks beyond a certain size are inherently dangerous because of the too big to fail problem. If other countries want to let their banks consolidate out of control, I’m not sure what we can do to stop it, but we don’t need to give them access to the largest market in the world. Keep our banks small and keep large banks out of our market. I think that’s the best solution.
March 23rd, 2009 at 6:21 pm
The market would have broken up the rest of the giant banks and former investment banks if it wasn’t for the government.. The market is the cruelest regulator of all.
The regulation going on now is regulating the markets so they survive. Through subsidy, outright transfers of cash, promises of much much more cash, and total forbearance in regard to their statutory capital requirements.
To break up C for instance would not be arbitrary. The furthest thing from it. It is a necessity by everything that is legal, just and most important, in accord with the principals of markets.
March 23rd, 2009 at 6:27 pm
Paulie,
Still not responding to my arguments. Well played…
Brendan,
Not really sure how you lock large banks out. I assume that you’ve taken note of my observation that killing our large banks puts us at a significant disadvantage globally.
Moreover, don’t you think those large banks will retaliate?
March 23rd, 2009 at 6:35 pm
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March 23rd, 2009 at 6:49 pm
Moreover, don’t you think those large banks will retaliate?
Funnier Ed:
http://www.huffingtonpost.com/andy-borowitz/in-new-terror-video-aig-d_b_175094.html
March 23rd, 2009 at 6:52 pm
ed,
educate yourself about social security. it is not going broke AS CURRENTLY CONSTITUTED for at least 40 years. Most of that assumes no change in healthcare. in addition, a few fixes should push that way past the turn of the century, just as fixes in the 1980s pushed it s “broke ” date back 40 years.
As for being a Ponzi scheme, so is almost everything according to your reasoning. Do banks really hold all bank deposits in cash? When you withdraw money, it is becasue someone else deposited it in the bank. that does not make it a Ponzi scheme. it is a failure to hold assets that makes a scheme a Ponzi, and social security (I beleive) holds the same assets that the chiones do, US treasury notes!
A sfo rit being my choice to invest in the market, you are correct, HOWEVER, short term investment at the expense of long term value hurts us all! If I am your neighbor, and I choose to put all my money in NCAA pools (that may or may not make me rich enough to be able to afford to move to a nicer neighborhood), instead of maintaining my property, will certainly affect your proerty values, and you have a right to demand that I keep up my property to minimum standards (ie. make long term investment) in order to protect your investment. Social responsibilities above and beyond grabbing every dollar you can get away with today still exist.
As for social srcurity, you will recieve your benefits, but even if you didn’t you benefit 2 ways. First , so that you don’t live in a country where the old and poor lie destitute on the street and 2, becasue you can go on knowing that should you become disabled or destitute, ther eis some safety for you, allowing you to invest your money in riskier (and hopefully more profitable) ways than just placing it in a safe nest egg, just in case.
March 23rd, 2009 at 6:53 pm
chiones is a mistped chinese. …sorry
March 23rd, 2009 at 6:54 pm
mistped should read mispelled. I have lost all hand eye coordination!
March 23rd, 2009 at 6:55 pm
Ed Smithe: I don’t know, with the exception of this little hiccup and the Great Depression, I think this model has worked fairly well.
Yes…except for the largest financial catastrophe of all time, which led to near-civilization-ending war, which in turn led to forty-five years of being five minutes away from nuclear Armageddon, what was the downside?
There truly is no stupid like conservative stupid.
March 23rd, 2009 at 7:01 pm
Ed,
You started saying we needed super-sized banks because having super-sized banks is what made us dominant over Europe throughout the 20th century. Then people point out that we didn’t use to have super-sized banks, and that they’re only a recent creation of deregulation. Then you say, who cares about the regulations, J.P. Morgan was bigger in 1946 then it is now. Then I point out that that’s wrong, and that deregulation really has resulted in larger banks. Then Brendan points out that it was Europe that traditionally had the super-sized banks, not us. So then you say that it was actually the fact “that Europe heavily consolidated their banking sector,” that gave them “A back seat to the U.S.” Then Brendan gets confused and asks, “So you’re for or against a consolidated banking industry?” At which point, you go back to saying “killing our large banks puts us at a significant disadvantage globally.”
So basically your argument is: We need to preserve a tradition of consolidated banking that we never actually had because it’s what makes us superior to Europe, which actually does have has a tradition of consolidated banks, and that tradition of consolidated European banks makes us superior to Europe. How the fuck am I supposed to respond to that?
March 23rd, 2009 at 7:07 pm
Why oh why,
I see we’ve reached the stage where your arguments fall off the face of the Earth. We’ve been through AIG…the guy who you voted for disagrees with you and agrees with me. Either he’s as stupid as I am or you’re too simplistic to understand this issue. Let me be the first to tell you that the HuffingtonPost (as much as I enjoy reading it) will not help you. On the retaliation issue, you’re far too much of a Wilsonian to comprehend financial warfare.
Alan,
That’s a good point with regard to the banks…hadn’t really thought of it that way. The difference with a bank though is that when you come for your money they have to give it to you (or declare bankruptcy). In the case of the government, they just pass a law that says that you were never entitled to what you were entitled to. Personally I’ll take the banks…but then again I have no choice.
Qwe,
You just don’t understand history. You pick a 1 year even and apply it to 70 years of performance. Had you had the ability to invest 1 dollar in the Dow Jones in 1945, you’d have more money today than you could imagine. Would there have been ups and downs? Sure. Are there risks? Sure. But you libs seem to assume that any money that you put into the market…your entitled to receive back. Unfortunately the market doesn’t work that way…which is why you have a choice. Social security on the other hand, well, see above.
March 23rd, 2009 at 7:15 pm
My God, Ed! You’re even stupider than I thought, which is really saying something.
March 23rd, 2009 at 7:19 pm
qwe,
Good rebuttal. I’ll take that to mean that this is just too complex for your first year of college.
March 23rd, 2009 at 7:22 pm
I see we’ve reached the stage where your arguments fall off the face of the Earth.
On this we agree, although unlike you I haven’t admitted being completely ignorant of the history of American financial regulation in a post titled “Breaking up the Big Banks”. I just think you’re a joke giving a bad name to trolls.
the guy who you voted for disagrees with you and agrees with me
Only because the alternative was McCain/Palin with Treasury Secretary Phil Gramm. Enough said.
your entitled to receive back. Unfortunately the market doesn’t work that way…
Investors poured trillions of dollars into worthless assets and now are receiving massive government subsidies to cover their bad judgment. Ed applauds this wonderful example of free market at work.
March 23rd, 2009 at 7:36 pm
I’ll take that to mean that this is just too complex for your first year of college.
Yes indeed, Ed. This is surely about my sad lack of financial acumen and sophistication, rather than your hilarious inability to see what’s RIGHT IN FRONT OF YOUR FACE. (Hint: go back and read what I wrote. Note how there was nothing in it about the return to money invested in the Dow since 1945.)
There really is no cure for conservative stupid. It’s more a cognitive issue than anything philosophical.
March 23rd, 2009 at 7:39 pm
Why oh why,
Not sure what you’re referring to, but you’re one to speak.
Glad to see that you brought your principles to the 2008 elections. Me, I didn’t vote for either McCain or Obama
And the last time I checked, the average investor with a 401(k) wasn’t getting shit from the government. I don’t like these interventions either, but the alternatives (especially for your most treasured classes of Americans) would have been far worse. Nearly everyone with a brain understands that.
And as for bailouts. Don’t lecture me on bailouts. Progressives have engaged in wealth redistribution for the last 100 years. Just what gives you the right to decided who’s worthy and who’s not.
March 23rd, 2009 at 7:45 pm
It’s too bad the Republicans didn’t get their away and invest old people’s Social Security money in the market because now it would be all gone and old people could live life to the fullest as envisioned by Charles Murray and eat dog food and live in cardboard boxes.
Pedro, I don’t how that was meant to be taken, but bravo!
On another note, where was the original social security question headed, Ed Smithe?
March 23rd, 2009 at 7:50 pm
And as for bailouts. Don’t lecture me on bailouts. Progressives have engaged in wealth redistribution for the last 100 years. Just what gives you the right to decided who’s worthy and who’s not.
Ed, this is a cyclical argument. You allow the government certain privileges by living in this country. Who’s right is it to decide who is worthy and who isn’t is a what-came-first type of question. I don’t care if someone earned the money themselves or the government has some say. This is a situation, as are many, that requires compromise.
March 23rd, 2009 at 7:51 pm
Qwe:
This? Yes…except for the largest financial catastrophe of all time, which led to near-civilization-ending war, which in turn led to forty-five years of being five minutes away from nuclear Armageddon, what was the downside?
So, the great depression led to WWII? Which in part led to the US developing nuclear weapons?
My apologies…Junior year of High School. I’m sorry that this is all too much for such a young man.
Yeah, can’t imagine that Japan wouldn’t have tried to take over the Pacific or Hitler try and rule the world…or any country try and develop nuclear weapons. Yes, this is all the cause of business. But, wait a minute, I thought that this was all the cause of organized religion? Gosh, religion and business…got to get rid of those two things.
March 23rd, 2009 at 8:01 pm
Robot,
By that logic I’ll assume that when and if the next crazy conservative becomes President and starts doing things that you don’t like, you’ll simply accept it, because, “you allow the government certain privileges by living in this country.”
We have rules as expressed by the Constitution. As far as I can see wealth distribution is not one of them. But then again, I’m somewhat biased when it comes to trying to follow the law.
March 23rd, 2009 at 8:19 pm
ed,
to levy taxes. Taxes are by definition a redistribution of wealth. those are the laws we live by.
the constitution allows the federal government(congreess, article 1 section
I haven’t read all the posts, but many of us have lived under conservative rule (that we disagreed with) for many years, and have both accepted AND fought against it, which I would expect any citizen to recognize as his duty.
March 23rd, 2009 at 8:20 pm
article section 8 , don’t know where that face ame from!
March 23rd, 2009 at 8:20 pm
article section 8 , don’t know where that face ame from!
March 23rd, 2009 at 8:23 pm
Robot,
By that logic I’ll assume that when and if the next crazy conservative becomes President and starts doing things that you don’t like, you’ll simply accept it, because, “you allow the government certain privileges by living in this country.”
We have rules as expressed by the Constitution. As far as I can see wealth distribution is not one of them. But then again, I’m somewhat biased when it comes to trying to follow the law.
Wow, getting a feel for how you think is startling! You read, but only the words that you want to read. Note that in my statement, I mention “compromise.” Twisting my words to say that I endorse an extreme is simply foolish.
As for your mention of rules and the Constitution you need to wake up. Are you simply stuck in the past? In any case, you suffer from a case of narrowing your vision and being inclusive of only the things that support your case – misleading! The Constitution bears certain specific rules, but rules/laws that dictate how life here in America progresses come from a whole host sources and not just the Constitution.
March 23rd, 2009 at 8:24 pm
Oh, and I missed an of in there as well.
March 23rd, 2009 at 8:31 pm
Robot,
I don’t believe in a living document. There are procedures for adding (or subtracting) things from the Constitution. If we’re to have a Constitution, shouldn’t we follow it?
Alan, taxes are not, by definition, a redistribution of wealth. In fact, the founders frowned on such practices as they saw it as tyranny. Taxes (or rather tariffs) were seen as a means by which to provide for the functions of the government. You should read Jefferson’s comments on the “general welfare” clause…they would be most enlightening as to how far one of the most left-minded founders was willing to go on the subject of “wealth distribution.”
March 23rd, 2009 at 8:43 pm
It seems to me the founding fathers had a stronger opinion on things like ‘torturing people to death’, ‘the executive branch keeping you in jail forever without a trial’ or ‘government spying on your letters and conversations without a warrant’ than on whether the top tax rate should be 37% or 39%, or whether it should apply to capital gains.
Presumably conservatives like Ed know constitutional law as well as they know economics.
March 23rd, 2009 at 8:46 pm
Ed Smithe,
By that last post you do lead me to believe you are stuck in the past. History informs and dictates the present, but only to a degree.
Even if you don’t believe in a living document the reality is that you have to fundamentally be active enough to change as fast as change itself (that is somewhat of an ideal, but striving for that ability is important). That requires hindsight, foresight and some rationality.
If we’re to have a Constitution, shouldn’t we follow it?
Now, sure if we have a Constitution we should follow it as best we can, but remember that a document such as the Constitution will never be adapted quickly enough to meet the change that occurs in this world. Also, I don’t know how you can hinge this whole discussion on the Constitution itself. It is not and never has been the end-all-be-all. Change happens!
March 23rd, 2009 at 9:35 pm
I expect once things have calmed down a little we’ll be hearing a lot more about re-regulating banks and putting the firewalls back.
March 24th, 2009 at 1:17 am
seriously, you are quoting thomas jefferson?! ok, well, the fed, THE FED is empowered by the government to set interest rates. It does ot allow market forces to set them, but controls them. As such, it makes certain assets more or less valuable depending on how it values money. There is no greater redistributor of wealth than that. The rights to patents, copyrights, etc.. are all government powes that redistribute wealth. As MY has shown, even local zoning laws redistribute wealth. S to decide that somehow taxes do or should not is a waste of time, theyu do, and have since before you or I were born. In fact, the basis for our revolution was the redistributionary value of taxes that the British enforced upon us. The revolution was not fought to preclude taxes but to ensure that taxes were directed towards the wealth of the nation as a whole and not to the benefit of the few (the east india co. for instance)
The simple act of having different tax rates for income and capital gains is redistributive.
I don’t give a rats a** what some old white slave owners thought about redistributing wealth, I would guess they thought it should move towards them and not non land owners, but so what. What was the “founders” opinion about the value of non-whites, or political parties? Should we obey those writings as well? still, even the founders believed in a “living” constitution, which is why they allowed for amending it!
Our goverment, most accurately described as by the people for the people, should protect the people’s interests. if unfettered greed harms the peoples long term interests, I applaud tax rememdies that even the playing field. I stand behind any regulation that promotes long term health over short term greed, which unfortunately has been the evolution of capitalism.
As for preferring banks (which you say can declare bankruptcy )to the government for social security, I prefer the one with the checks and balances where we at least get to vote to the one that worships profits. i prefer the competence of my government army, police, nasa, to your private enron, AIG, and eneral motors, Your “friends” do all they can to manipulate the government to protect their own interests at the expense of the rest of us, which is exactly what big business has done for at least the past 30 years!
They have sought short term gain and ignored the long term, but the long term has arrived anyway and it is time to pay the piper.
March 24th, 2009 at 4:05 am
I prefer the competence of my government Army, police, NASA, to your private Enron, AIG, and General motors, Your “friends” do all they can to manipulate the government to protect their own interests at the expense of the rest of us, which is exactly what big business has done for at least the past 30 years!
Haha, suck on that! Actually, I prefer the same.
March 24th, 2009 at 7:20 am
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March 24th, 2009 at 8:48 am
I hate when shit breaks down into a cliched liberal vs. conservative battle. Ed obviously has no interest in discussing the actual banking issue, so he just starts flinging shit and talking about social security, liberals hate religion, liberals are dumb college students, living constitution, blah blah blah. Then Alan goes and takes the bait with this gem: “I don’t give a rats a** what some old white slave owners thought about redistributing wealth.” Seriously? Do you really think this is some kind of trump card that automatically wins any constitutional argument?
March 24th, 2009 at 10:23 am
If banks are taken over and then returned to the private sector, it is not “easy” to avoid having even bigger banks. Who is going to buy them back? Would having them owned by hedge funds be better than the present situation? The number of banks has been pretty steadily dropping through the 20th and 21st centuries. This was hardly changed by the crisis of the 80’s – for example the assets of the failed Continental Illinois were ultimately taken over by BofA. S&Ls never recovered and their mortgage business was largely assumed by others.
March 24th, 2009 at 12:38 pm
p[aulie,
I don’t think I took bait as much as I feel that claiming that because thomas Jefferson wrote something in 1780 it somehow becomes an oracle for how modern americans should view the world (ed discussed his words on taxation as a mechanism for redistribution of wealth). the description is simply to show how out of touch thos epeople are with what we now universally believe to be correct. i think Jefferson was a great great man, but we don’t have to bow to his every thought because he was around at the beginning. Only what was put in the constitution matters, and even that must be viewed in its time.
Skeptonomist. Once banks are nationalized, they are sold off IN PARTS. Certainly there will be pressure to allow mergers but that is where a government which learned the lessons of the past 20 years pushes back.
March 24th, 2009 at 2:47 pm
Alan,
It’s still shit flinging. It’s a logically irrelevant ad hominem argument. No matter what the subject is you could dismiss any argument made by any founder simply by saying, “he’s an old white man who owned slaves.” It’s also really cliche.
March 24th, 2009 at 4:19 pm
I accept that it is irrelevant to the post topic, but it is not irrelevant to the posted statement that using taxes as a method of redistribution is wrong because Thomas Jeffersonn said so 230 years ago.
I agree that it is a cliche, but it was 1 am at night and it just came off my fingers.
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