Yesterday’s JEC Hearing on Too Big To Fail did not include any financial industry representatives. This surprised me - surely they want to go public with their views on the future structure of the financial system? Obviously, they have great behind-the-doors access on Capitol Hill, but surely it is not in their interest to have right, left, and center piling on with regard to breaking up Big Finance? Yesterday, Thomas Hoenig, Joseph Stiglitz, and I were in complete agreement on this point, and my idea of using antitrust measures against major banks seemed to gain traction during and after the hearing.
Apparently, the committee invited a number of leading people from the industry (i.e., individuals who generally articulate the case for big banks) and they were all too busy to attend (Update: this statement is incorrect; the potential witnesses who were unable to attend are academics). This is a curious coincidence, because someone else – in an unrelated initiative – has been trying to set up a discussion involving me and people from the Financial Services Roundtable and/or the American Bankers Association, to be held at the National Press Club, but their calendars are completely full (i.e., there is literally no day that works for them, ever).
There has been some counterargument – e.g., against our Atlantic article on American oligarchs – from people who wish to defend the way that big finance currently works, but so far this has been quite limited in the public domain. The most pushback so far probably came from Carlos Gutierrez (Commerce Secretary, 2005-09), who argued Monday on CNBC that our argument is “somewhat sensationalist” and that it would lead to a wholesale and unproductive assault by government on the finance industry (i.e., an application of the Economics of Vilification).
But of course our argument, both in the Atlantic and more broadly, is not against finance per se. In fact, we’ve received some strong expressions of support from within the financial sector – just not particularly from firms that are Too Big To Fail – as well as from many in the risk-taking entrepreneurial sector. And here Thomas Hoenig – President of the Kansas City Fed, with long experience regulating, winding down, and generally overseeing banks; and very far from being a sensationalist - absolutely nailed it towards the end of yesterday’s hearing. My recollection of his exact wording is: whenever you have banks that are too big to fail, you will get oligarchs (yes, he said oligarchs).
Perhaps Mr Gutierrez and Mr Hoenig can be brought together in some form of public discussion?
Update (4/22, 8pm): No finance industry representatives were invited to the JEC hearing.