The Corner

Re: Republicans Should Take Up ‘Too Big to Fail’

Yes, Lou, it would be a capital idea for a GOP candidate to run on the idea of “stocking” key Treasury and economic posts with business entrepreneurs. This strategy would be a simple way of approaching a complex problem. 

In the same vein, it would have been far better for President Obama to nominate Simon Johnson to head the National Economic Council (Larry Summers’s old post), rather than Gene Sperling. Sperling is qualified and all that, but his cosiness with too-big-to-fail finance sends a bad signal.

Johnson, on the other hand, understands the threat that a financial industry with a mainline to the U.S. balance sheet poses:

The financial system poses a major risk to our fiscal outlook over the next few years. Unless you think that the Dodd-Frank reform bill really ended “too big to fail” and the associated excessive risk-taking culture, you should worry a great deal about the assumption of boom, bust, bailout and fiscal damage that the Bank of England now refers to routinely as the “doom loop.”

Of the national-level politicians now pushing for spending cuts, almost none showed up to fight to contain the fiscal risks posed by our largest banks. The Brown-Kaufman amendment to Dodd-Frank — which would have placed a limit on the size and debt (relative to equity) — was supported by 33 senators, only a handful of whom were Republican.

But then again, the Obama administration also fought hard against Brown-Kaufman. 

And Johnson gets, too, that the answer is not to rail impotently against big, bad finance (as politicians of both parties do), but calmly to make finance subject to market forces. 

This approach, incidentally, would be good for finance in the long run, too. What’s good for JPMorgan Chase — having its bondholders thinking that they can lose money, and thus not suffocating it with cheap funds — really is good for America. 

— Nicole Gelinas is contributing editor to the Manhattan Institute’s City Journal and author of After the Fall.

Most Popular

Culture

New England Journal of Medicine Pushes Reparations

Reparations would grant African Americans government benefits not paid to other Americans to rectify the awful sin of slavery and the "peculiar institution's" residual harm. It is a favored policy of hard progressives, so of course, the New England Journal of Medicine -- which regularly promotes left-wing causes ... Read More
Culture

New England Journal of Medicine Pushes Reparations

Reparations would grant African Americans government benefits not paid to other Americans to rectify the awful sin of slavery and the "peculiar institution's" residual harm. It is a favored policy of hard progressives, so of course, the New England Journal of Medicine -- which regularly promotes left-wing causes ... Read More
Books

Three Cheers for the Quiet Ones

People often dismiss shy, quiet characters in literature. Readers prefer to identify with Jo March, Elizabeth Bennett, or Anne Shirley -- those delightful, bold, and charming characters who made a deep impression on us when we first encountered them. While there’s nothing wrong with emulating or admiring these ... Read More
Books

Three Cheers for the Quiet Ones

People often dismiss shy, quiet characters in literature. Readers prefer to identify with Jo March, Elizabeth Bennett, or Anne Shirley -- those delightful, bold, and charming characters who made a deep impression on us when we first encountered them. While there’s nothing wrong with emulating or admiring these ... Read More
Media

Wajahat Ali, Ctd.

I gather he didn’t like my comment on his New York Times op-ed on the folly of reaching out to Trump supporters. He snipes, “I await The National Review’s piece on reaching out to Biden voters and reading about their ‘elegy’ and understanding their ‘economic anxiety.’” After the 2016 election, ... Read More
Media

Wajahat Ali, Ctd.

I gather he didn’t like my comment on his New York Times op-ed on the folly of reaching out to Trump supporters. He snipes, “I await The National Review’s piece on reaching out to Biden voters and reading about their ‘elegy’ and understanding their ‘economic anxiety.’” After the 2016 election, ... Read More