Posts Tagged ‘sherrod brown’

The law can’t touch them at all

9 March 2013

“Too big to prosecute” is the recurring headline this week after Attorney General Eric Holder’s remarkable statement before the Senate Judiciary Committee on Wednesday:

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

Where to begin? “Too big to fail” is one thing, but to say these institutions are too big to clean up their act is another. The attorney general seems to be implying that the big banks are more important than the laws themselves. It is one thing to say that the outright collapse of these institutions would bring economic ruin. It is quite another to assume that prosecuting criminal acts by them or some of their employees would also bring ruin.

Skeptics have long called the big banks “too big to prosecute” because their lavish campaign contributions give them unparalleled access and influence in Washington, but Holder’s remarks point to something more insidious: ideological capture. When cabinet officials are products of Wall Street or, worse, credulously believe Wall Street claims that their firms are delicate life-giving flowers that must never be disturbed, we have a problem that won’t go away anytime soon.

Fortunately, several members of Congress, including Republicans David Vitter and Charles Grassley and Democrats Sherrod Brown and Elizabeth Warren, are pushing back. Vitter and Brown have co-sponsored a bill to limit the size of the big banks. But we have been here before, as recently as 2010, when a similar bill lost by a vote of 61-33 and was opposed by the Obama administration. Until further notice, it’s hard to disagree with these words of Huey Long from 1932:

“They’ve got a set of Republican waiters on one side and a set of Democratic waiters on the other side, but no matter which set of waiters brings you the dish, the legislative grub is all prepared in the same Wall Street kitchen.”

The law can’t touch them at all.

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Too big, too bad, too late: Greenspan speaks

5 May 2010

Simon Johnson has yet another fine post on the need to break up the biggest banks, for the sake of financial stability.  Unfortunately, he notes, it looks like it ain’t gonna happen, that the SAFE Banking Act sponsored by Sens. Sherrod Brown (D-OH) and Ted Kaufman (D-DE) won’t make it anywhere near the Senate floor.*

The post includes a remarkable quote by Alan Greenspan, who now seems to get it:

“For years the Federal Reserve had been concerned about the ever larger size of our financial institutions. Federal Reserve research had been unable to find economies of scale in banking beyond a modest-sized institution. A decade ago, citing such evidence, I noted that ‘megabanks being formed by growth and consolidation are increasingly complex entities that create the potential for unusually large systemic risks in the national and international economy should they fail.’ Regrettably, we did little to address the problem.”

Now, Greenspan is a bit like the Bible, Shakespeare, or Adam Smith — comb through all his words and you can probably find something to support your position, whatever it is.  But it is striking that he acknowledges the lack of economies of scale brought by big banks and their potential for systemic damage.  His regret at not addressing the problem would be more constructive if he could find a concrete proposal to support, like Sen. Kaufman’s bill, for example.  (I’m reminded of the old quote A little knowledge that acts is worth infinitely more than much knowledge that is idle.)

* Update:  The Brown-Kaufman SAFE Banking Amendment did make it to the Senate floor on May 6, but it was voted down, 33-61.  The roll call vote is here.  About two-thirds of Democrats voted for it, along with three Republicans.  Among the Democrats voting No were Senate Banking Committee Chairman Christopher Dodd and New York’s Chuck Schumer and Kirsten Gillibrand.

Too big

22 April 2010

The NYT has a good piece on the prospects for federal breakups of the big banks.  It’s not part of the financial reform bill that the Senate Finance Committee just passed, or the one the House passed earlier, but a group of Democratic senators including Sherrod Brown of Ohio and Ted Kaufman of Delaware just introduced such a measure.

Some numbers to sink your teeth into, from the article:

The banking industry has become much more concentrated as it has grown in recent years. In 1995, the assets of the six largest banks were equivalent to 17 percent of G.D.P.; now they amount to 63 percent of G.D.P. Meanwhile, the share of all banking industry assets held by the top 10 banks rose to 58 percent last year, from 44 percent in 2000 and 24 percent in 1990.

UPDATE: Simon Johnson likes the Kaufman-Brown bill and discusses it at length here.  A longer post here about the specious arguments by two senators and Larry Summers in favor of preserving the size of the big banks.