Former Texas governor Rick Perry was on Face the Nation this morning to make the case for his recently launched presidential campaign, and h emphasized not just the work he’s done since his failed 2012 campaign, but also a populist tone and an eagerness to take on big business. He argued that the Dodd-Frank financial-reform rules are constraining the work of community banks, hurting opportunities for small businesses, while big Wall Street banks retain a too-big-to-fail guarantee.
So, asked CBS’s John Dickerson, what’s the answer to oversized, privileged Wall Street banks? “Regulate them,” Perry said. Especially in a way that will ensure they can’t receive future bailouts: “If they make bad decisions, let them live with them,” Perry said.
#related#Conservatives have at times overstated the degree to which Dodd-Frank entrenches “too big to fail” status — the largest financial firms certainly don’t like being designated “systemically important” under the law — but Perry’s quite right that the law is imposing big costs on small banks while not doing too much to rein in the biggest firms.
He doesn’t have details yet on how he’d like to fix that, but, he said, “One of the things [Texas has] been successful in was creating that balance” between allowing banks to take risks and restraining financial speculation. Texas never saw a housing bubble quite like the rest of the country, and never saw a serious mortgage bust, either, in part because of sensible restrictions on the mortgage market — most prominently, home owners basically can’t borrow more than 80 percent of their home value.
As this paper from the Dallas Federal Reserve recounts, there were a couple other factors at play, but Texas’s being the only state with such a regulation probably helped contain speculation and the resultant disruption from the housing crisis. Getting financial regulation right isn’t easy, but Perry seems to know it can be both good politics and good policy.