Now that Jon Huntsman has dropped out, Mitt Romney would do well to study Huntsman’s campaign platform for the financial industry and “too big to fail.” Huntsman was the only presidential candidate to address “too big to fail” head-on. Last October, he wrote in the Wall Street Journal:
More than three years after the crisis and the accompanying bailouts, the six largest American financial institutions are significantly bigger than they were before the crisis, having been encouraged to snap up Bear Stearns and other competitors at bargain prices. …
The major banks’ too-big-to-fail status gives them a comparative advantage in borrowing over their competitors thanks to the federal bailout backstop. This funding subsidy amounts to roughly 50 basis points, or one-half of a percentage point in today’s market.
To end “too big to fail,” Huntsman counseled derivatives reform — which would help allow big, complex financial firms to fail in an orderly fashion — as well as ending banks’ reliance on short-term debt.
No, his solutions weren’t perfect. But Huntsman acknowledged that much of the financial industry operates on a plane outside of free-market discipline.
Perhaps most important, Huntsman said that the next president should “restore the rule of law” when it comes to “widespread” bank abuses like robo-signing. Many of Huntsman’s peers aren’t concerned that banks have filed so many false or incorrect documents with courts.
People are still mad about this stuff. It’s not wise to ignore it.
Romney, though, as Huntsman noted in the same op-ed, has “offered no solutions” on too-big-to-fail “other than implying” in a debate comment “that he would participate in a bailout of Greece” — really a bailout of Greece’s financial-industry lenders.
Romney still needs a better position on this topic — not least because he comes from the financial industry. He could still turn that experience into an advantage (or at least less of a disadvantage) by saying that he knows the financial industry well enough to regulate it so that all its companies compete in a free market.
Romney should brush up on the topic by talking to Huntsman, who has thought about it.
— Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.