Elizabeth Warren And The Independent Community Bankers of America Are Right: Antonio Weiss Should Not Become Undersecretary for Domestic Finance
By Simon Johnson
Antonio Weiss has been nominated to become Undersecretary for Domestic Finance at the Treasury Department. A growing number of people and organizations have expressed reservations about this potential appointment, which requires Senate confirmation – including Senator Dick Durbin (D., IL), Senator Jeanne Shaheen (D.,NH), Senator Joe Manchin (D., WV), the American Federation of Teachers (in a press release on December 17th), and other groups. And, from another part of the political spectrum, the Independent Community Bankers of America has also come out strongly against Mr. Weiss.
In a speech last week, Senator Elizabeth Warren detailed her concerns about Mr. Weiss’s background:
“He [Mr. Weiss] has focused on international corporate mergers and companies buying and selling each other. It may be interesting, challenging work, but it does not sufficiently qualify him to oversee consumer protection and domestic regulatory functions at the Treasury that are a critical part of the job.”
And Senator Warren made it clear that the Weiss nomination needs to be seen in this broader context:
“Time after time in government, the Wall Street view prevails, and time after time, conflicting views are crowded out.”
A line must be drawn and, as Senator Warren said on Friday evening, with regard to the Wall Street view that what is good for executives at big banks is good for the country,
“Enough is enough.”
The latest round of pushback from Weiss supporters against Senator Warren makes three points. First, this administration is not captured by the Wall Street view. Second, Mr. Weiss is not captured by the Wall Street view. And, third, that Mr. Weiss is so perfectly qualified for the job that all these broader issues are irrelevant or even illegitimate. None of these points has a substantive basis or can withstand scrutiny. The ICBA, AFT, and Senators Durbin, Machin, Shaheen, and Warren are right to continue opposing Mr. Weiss’s appointment. Continue reading
By Simon Johnson
Citigroup is a very large bank that has amassed a huge amount of political power. Its current and former executives consistently push laws and regulations in the direction of allowing Citi and other megabanks to take on more risk, particularly in the form of complex highly leveraged bets. Taking these risks allows the executives and traders to get a lot of upside compensation in the form of bonuses when things go well – while the downside losses, when they materialize, become the taxpayer’s problem.
Citigroup is also, collectively, stupid on a grand scale. The supposedly smart people at the helm of Citi in the mid-2000s ran them hard around – and to the edge of bankruptcy. A series of unprecedented massive government bailouts was required in 2000-09 – and still the collateral damage to the economy has proved enormous. Give enough clever people the wrong incentives and they will destroy anything.
Now the supposedly brilliant people who run Citigroup have, in the space of a single working week, made a series of serious political blunders with long-lasting implications. Their greed has manifestly proved Elizabeth Warren exactly right about the excessive clout of Wall Street, their arrogance has greatly strengthened a growing left-center-right coalition concerned about the power of the megabanks, and their public exercise of raw power has helped this coalition understand what it needs focus on doing – break up Citigroup. Continue reading
By Simon Johnson
Section 716 of the Dodd-Frank financial reform act requires that some derivative transactions be “pushed-out” from those part of banks that have deposit insurance (run by the Federal Deposit Insurance Corporation) and other forms of backstop (provided by the Federal Reserve). This is a sensible provision that, if properly implemented, would help keep our financial system safer, protect taxpayers and reduce the likely need for bailouts.
Now, at the behest of the biggest Too Big To Fail banks and as part of the House’s spending bill (to be voted on tomorrow or in coming days), this “push out” requirement is on the verge of being repealed. Democrats and Republicans should refuse to vote for the spending bill as long as it contains this requirement.
This is not a left vs. right issue. It is a fundamental systemic risk issue, on which people across the political spectrum who want to lower those risks can agree – Section 716 should not be repealed. In fact, some of the sharpest voices on this issue come from the right. Continue reading
By Simon Johnson
Antonio Weiss has been nominated by President Obama to become the next Under Secretary for Domestic Finance at the U.S. Department of the Treasury. Mr. Weiss’s supporters argue that he is highly qualified for this senior fiscal policy job. They are wrong. Mr. Weiss has no known relevant qualification or experience for this position. Continue reading
By James Kwak
This week I posted two things on Medium. The first was a commentary on changes in the markets for law students and lawyers. In short, if you are thinking of going to law school, the case is significantly stronger than it was four years ago. Whether it’s strong enough to pull the trigger depends on too many factors for me to say anything about your particular situation.
The second was about Serial, the new podcast from the This American Life people. Longtime blog readers know that I love love love TAL. I was really looking forward to Serial, and it had its moments. But I finally gave up on it when it framed one too many unreliable recollections with pregnant pauses and ominous music. I just don’t think there’s enough there there, at least not for me.
By James Kwak
Over at Medium, I just posted a new article about the Jonathan Gruber-Obamacare “scandal.” Republicans are highlighting Gruber’s remarks as proof that the individual mandate really is a tax, and that the administration hid that fact in order to put one over on the public. But this whole argument flows from a faulty premise: that whether something is a tax or not is a question that has a knowable answer.
Last week I wrote a post complaining about my dismal experiences on United Airlines, which I chalk up to two things. The first is miserable computer systems. (It’s remarkable when you can see a computer system failing, and you know exactly what’s going wrong.) The second is the oligopolistic/near-monopolistic structure of the industry, especially when combined with a do-nothing Antitrust Division over at DOJ. It’s not just me: Tim Wu thinks so, too.
Finally, before that I wrote a post about Amazon’s extraordinary dominance in online retailing of physical goods. Who cares if no one will buy your phone when people are happy using other people’s phones to buy toilet paper and diapers from you?
By Simon Johnson
It is hard to move around in Washington these days without bumping into a conference on the future of finance. But most of these are either closed to the public, or run on behalf of large banks as part of their lobbying efforts.
Next week, there will be a conference open to everyone at George Washington University to discuss where we really are on financial reform, and what still needs to be done. You should register in advance through the web page (link given above), but there is no cost to attend.
Featured speakers include Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, and Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corporation. We also have a wide range of other technical experts – on issues from resolution to “shadow banking” – who are willing to speak frankly and engage in honest discussion.
GW Center for Law, Economics and Finance (C-LEAF), Stanford Graduate School of Business, Max Planck Institute for Research on Collective Goods, and Better Markets generously made this event possible.
If you want to understand what has really happened to finance, show up.