By Simon Johnson
On Friday afternoon, NPR’s All Things Considered broadcast Robert Siegel’s interview with me on 13 Bankers (further down that link there is an excerpt from the very beginning of the book).
We talked, naturally enough, about how the ideas in 13 Bankers connect with the current policy debate – specifically the financial reform legislation now before the Senate. As anticipated when the book went to press in January, some sensible measures to protect consumers of financial products seem possible – yet this progress just emphasizes how and why we have not yet broken through on Too Big To Fail issues.
But there is a broader point here also. What happened in 2008-09 should not be allowed to happen again. The nature of power in and around the financial sector has become so great – and so distorted – that it harms the rest of us.
I don’t think a majority of Americans understand how much influence financial institutions have in Washington, DC. Banks used to answer to Washington. They were once held accountable for their actions. That is no longer is the case.
We have not previously had such a concentrated banking system in the United States; it’s terrifying how much of our financial future is wrapped up in the big six. We don’t need this level of concentration and we should recognize the dangers that it brings. This view is not anti-finance – but we are very much against the way our biggest banks operate today, and we definitely (and in detail) oppose people who seek in any way to sustain the power of these organizations.
The NPR interview hit many key points but also – in 8 minutes – just scratched the surface. In 13 Bankers, we take you through the back story – the painful history that brought us here and that now makes it so hard to move forward.
But the book is not pessimistic. We offer American models of reform – instances from our history when elected representatives, with all their limitations and failings, took on concentrated financial power. Luckily for us, despite its massive and seemingly overwhelming advantages, big finance lost in each of the three big confrontations of the past two hundred years.
Each time, most Americans initially did not grasp how the system works, and this proved a major obstacle to reform. But each time political leadership was able to explain what needed to be done – and to persuade the mainstream that this was an important priority.
We can do it again. We must – the consequences otherwise would be too awful. Absent reform, another bailout – indeed a more costly bailout with global consequences, millions of jobs lost, and a ruinous impact on our government budget – is unavoidable.