By Simon Johnson
After a long summer of high-profile scandals – JPMorgan Chase trading, Barclays rate-fixing, HSBC money-laundering and more – the debate about the financial sector is becoming livelier.
Why has it has become so excessively dominated by relatively few very large companies? What damage can it do to the rest of us? What reasonable policy changes could bring global megabanks more nearly under control? And why is this unlikely to happen?
If any of these questions interest you – or keep you awake at night – you should take another look at the last time we had this debate at the national level, and reflect on the work of Ted Kaufman, the former Democratic senator from Delaware, who was far ahead of almost everyone in recognizing the problem and thinking about what to do.
Senator Kaufman represented Delaware in 2009 and 2010, and Jeff Connaughton – his chief of staff – has a new book that puts you in the room. In “The Payoff: Why Wall Street Always Wins,” we see Senator Kaufman as chairman of oversight hearings on the Justice Department and the F.B.I.’s pursuit of financial fraud, pushing the Securities and Exchange Commission on the dangerous rise of computerized trading and working with Senator Sherrod Brown, Democratic of Ohio, on the legislative fight to impose a hard cap on the size and debts of our largest banks. (I wrote many pieces supporting the work of Senator Kaufman at the time, including in this space, but I never worked for him.) Continue reading
Neil Barofsky For The S.E.C.
By Simon Johnson
There are two fundamentally different views regarding modern Wall Street. The first is that the financial sector has been terribly and unjustly put upon in recent years – regulated into the ground and treated with repeated disrespect, including by the White House.
There was, for example, an impressive amount of whining this week when no one from a big bank was invited to a high-profile meeting with the president on fiscal issues. As the people holding strongly to this view run large financial institutions and have effective public relations teams, this has become an important part of the conventional or establishment wisdom, repeated without question in some parts of the media.
The second view is that the powerful people who run global megabanks have lost all sense of perspective – including failing to realize that they have more access to people at the top of our political power structures than any other sector has ever had. Anyone who doubts this view – or wonders exactly how the revolving door among politics, lobbying and banking works – should read Jeff Connaughton’s account, “The Payoff: Why Wall Street Always Wins” (which I have written about in more detail before). Mr. Connaughton is most gripping when he describes the failure of law enforcement around securities issues, including issues with both the Department of Justice and the Securities and Exchange Commission. Continue reading →
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Posted in Commentary
Tagged Dennis Kelleher, Neil Barofsky, Ted Kaufman