By Simon Johnson, co-author 13 Bankers: The Wall Street Takeover and The Next Financial Meltdown
Attitudes towards big banks are changing around the world and across the political spectrum. In the UK, the new center-right government is looking for ways to break them up:
“We will take steps to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way; while recognising that this will take time to get right, the commission will be given an initial time frame of one year to report.”
The European Commission, among others, signals that a bank tax is coming; presumably, as suggested by the IMF, this will have higher rates for bigger banks and for banks with less capital. And other European officials are increasingly worried by the lack of capital in German banks, by the recent reckless lending sprees in Ireland and Spain, and by the dangers posed by banks that are much bigger than their home countries (e.g., Switzerland).
Yet top Obama administration officials refuse to change their opinions in the slightest; they have dug in behind the idea that they represent the moderate center on banking policy. This is a weak position; it is simply a myth with no factual basis – the people who pushed effectively for more reform over the past few months were the center, not the left, of the Democratic party. Continue reading