In the aftermath of Tuesday’s Massachusetts special election debacle, the White House today is set to announce a major change of strategy on financial reform, with the president to propose new legislation that will limit the size and complexity of banks.
Such legislation is unlikely to pass the Senate. In fact, the approach to financial reform already in place, crafted by Senator Christopher J. Dodd with the blessing of the White House, was to trade away some parts of the House bill — including perhaps the potential new consumer protection agency for financial products — in return for sufficient Republican support to pass a bill in the next month or two.
But fresh from their success in the Democratic heartland, the Republicans will be less inclined than before to compromise in any meaningful way. They may keep negotiating, but the Senate Democratic choice will quickly become: pass a law with little sensible content, or don’t pass anything and look ineffectual.
Fortunately, there is an alternative — one laid out neatly by Krishna Guha of the Financial Times on Tuesday. Instead of pursuing the issue of those “too big to fail” financial institutions exclusively through legislation, the administration could launch instead one or more serious antitrust investigations into the behavior of our biggest banks. Continue reading
Monopolies Everywhere
By James Kwak
Thomas Frank has a review in the Wall Street Journal (behind a paywall, but Mark Thoma has an excerpt) of Barry Lynn’s new book Cornered, which apparently documents the prevalence and power of monopolies and oligopolies in lots and lots of industries, not just finance. (I guess one response would be that we have been too harsh on the banks, since everyone’s doing it; but I still think banks are special for all sorts of reasons I won’t go into here.)
The problem, as Frank says, is that “the antimonopoly tradition is a museum piece today, and antitrust enforcement has been largely moribund since federal officials during the Reagan Revolution lost interest in this most brutal form of economic intervention.” Antitrust enforcement became a question of measuring predicted changes in consumer welfare, which meant that it became the province of models. More importantly, we are now in at least our fifth consecutive administration that sees big, profitable companies as inherently good, without stopping to question how they extract those profits.
The solution is already there to hand — go back to enforcing the existing antitrust laws. And appoint Supreme Court justices who are interested in enforcing them. But that assumes that the administration cares about the issue. Do they?
(For one thing, I applied for an internship in the DOJ’s antitrust division for this coming summer . . . and I was turned down.)
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Tagged antitrust