Thursday, July 9, 2009

TBTF?-3

"Nearly a century ago, the jurist Louis Brandeis railed against what he called the 'curse of bigness.' He warned that banks, railroads and steel companies had grown so huge that they were lording it over the nation's economic and political life. ... Today, amid the wreckage of the gravest financial crisis since the Great Depression, bigness of one of our biggest problems. ... In its overhaul of financial regulation last week, the Obama administration proposed several measures to try to contain the biggest of America's big banks. But it stopped far short of calling for the dismantling of those institutions. ... But if a company is too big to fail, should it be considered too big to exist? Brandeis worried that the corporate giants of his day would imperil democracy through concentrated economic power. His essays, collected in book form and published in 1914 under the title, 'Other People's Money--and How the Bankers Use it,' helped drum up support for the creation of the [Fed], antitrust laws and trust busting. ... Lawrence H. Summers, the White House economic adviser, says there is no going back to the days of small banks", my emphasis, Eric Dash at the NYT, 21 June 2009, link: http://www.nytimes.com/2009/06/21/weekinreview/21dash.html.

"'We need to get rid of too big to fail,' says Allan Meltzer, professor of political economy at Carnegie Mellon University in Pittsburgh. 'It perpetuates a system where bankers make profits and the public takes losses. We want to put responsibility back on bankers.' ... Speaking of Fannie Mae and Freddie Mac, Meltzer says ... 'We should take Fannie asnd Freddie and close them down'," Carolyn Baum at Bloomberg, 23 June 2009, link: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a05rHorIdIzg.

Why not Larry? Whose pocket are you in anyway? Decades ago our Republic existed with smaller banks. Why can't we today? Other People's Money originally appeared as a series of articles in Harper's in 1913. The problems Brandeis wrote of still plague us today. Yes, ED such institutions should be busted up. Now.

Yes Meltzer. I guess Meltzer is not on Citigroup's short list for consulting projects.

4 comments:

Anonymous said...

I keep thinking they won't bust up Citi etal cause they are the plumbing for global payment flows in addition to be insolvent and systemically threatening...

They are utilities...

Summers... he is a Status Quoan... he's not gonna change a thing... he has always been on the side of the big banks...

So the "green shoots" mirage goes on... reality will drive this show to the next act... and China has the script in its hands...

We will fail as a nation if we if devote our resources to maintaining the status quo... the big banks are not sustainable through taxpayer dollars...

Public Private Investment Program... that won't do it...

Robert said...

It seems so simple to let capitalism rule. Darwinian survival of the fittest and all...but its human nature to resist feeling the impact. Too many people with too much influence at this point. How do you prevent "bigness" though. That seems to be a slipperly slope as well. All of these things will work themselves out over time...they are just reflections (on a grander scale) of human behavior. Love the writings...keep up the insightful work.

Best Regards,
Robert
AccountingNation.com

Independent Accountant said...

Robert:
Thanks. Human nature does not change readily, it at all. Not expecting any big changes, Mencius Moldbug of Unqualified Reservations, looks for what he calls a "reset". Germany had one with the rise of Hitler which followed the 1922-23 hyperinflation. This does not mean I expect an American Hitler, but some type of Ceasarism as Amaury de Reincourt described in his "The Coming Ceasars", 1957. Obama keeps appointing "Czars". How interesting. Think about it.

Anonymous said...

IA...

"Reset" uhm...

It would seem economic conditions are creating a "reset" already...

Government can open up and reduce responsibilities to the people and really deliver them (like defense...hello Mexican border) or move towards totalitarianism...

Do you really think that Pres-O has the cojones for that? I don't see it... it seems he is barely holding it together now... green shoots withering...