Agreeing on the Problem

By James Kwak

Over the past month, Simon and I have become very closely associated with the Brown-Kaufman amendment to break up big banks, and that’s an association I welcome, especially given the last chapter of 13 Bankers. The fact that the amendment came from basically nowhere and got thirty-three votes in the Senate is, to me, an encouraging sign. But while this solution looks like it is unlikely to pass in this session of Congress — and there is debate about whether it is the right solution to begin with — the more encouraging sign is the amount of agreement on the problem to be solved: a financial system that is too big, too concentrated, and too powerful.

I wrote a guest post for the Harvard Law School Forum on Corporate Governance and Financial Regulation, a group blog, on this broader issue and some of the other solutions that have been floated. As we’ve said many times, as long as debate moves in this direction, that’s progress.

12 thoughts on “Agreeing on the Problem

  1. “Close” only counts in horseshoes and hand grenades. So far, literally nothing has changed.

    Getting people talking is a prerequisite to progress, but until something serious passes into law — which it won’t — no progress has been made.

    Talk is not action.

  2. A good problem statement includes:
    1) the problem to be solved – failure of one financial institution can cause a world-wide recession/depression
    2) who is impacted – the economies and peoples of all developed nations.
    3) what a successful solution would look like – this is a hard one. Has something to do with establishing acceptable limits for inflation/deflation, unemployment, etc.

    Get a solid problem statement which everyone agrees on then you can postulate solutions and continually validate that they satisfy the desired outcomes – it can be documented how every proposed action would satisfy the desired solution. Note that the problem statement generally gets scoped, tweaked and broken into multiple problems as one works through the process.

    I have always found this process quite effective for getting all the ducks dancing on the same beach, and have witnessed some brilliantly creative solutions.

    It’s hard to get to your destination if you don’t have a clue where you want to be.

  3. How about making competitive markets the law of the land?

    Capitalism always results in oligopolies that are non competitive, and that infiltrate governance in order to maintain their dominance.

    So by definition concentrated dominance in any industry should be met with trust busting, or government subsidies to competitors. Subsidize organic farming instead of corn monoculture, for one example.

    We’re having difficulty because the oligopolies are already very well established, have their plutocrats installed in government, and are generating free cash sufficient to maintain their plutocrats. Free cash that cannot be freed up to go to more productive enterprises.

  4. The lie is comfortable, an illusion easy to live with, familiar, and safe. Writing from the ‘disgraced profession’ of economics, James K. Galbraith speaks of the unspoken, the many frauds and deceptions underlying the recent financial crisis centered in the US. Many will read this and shake their heads in agreement, but will be unable to take the next logical step and internalize the implications of the depth and breadth of the dishonesty that enabled it then, and continues to sustain it, even today.

    Galbraith is asking ‘why’ and framing a further inquiry into the consequences of this unwillingness to reform.

    “Some appear to believe that “confidence in the banks” can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion.”

    It is easier to go with the flow, relax, rationalize, and be diverted and entertained by ‘the show.’ The truth may set you free, but before that it can make you feel very insecure and uncomfortable, especially when it requires challenging the ‘official story’ and policy decisions.

    Better to say nothing offensive to the oligarchs, and even occasionally to utter intelligent sounding condemnations of those who dare to question the very things you wonder about, and fear, in order to prove your loyalty and to reassure yourself that you are a right-thinking, practical individual.

    For the disparity that is unavoidably noticed between what is seen and what is said makes one uneasy, fearful that they are losing their bearings, if not reason. And the vested interests play on those fears. See Techniques of Propaganda

    The consequences of ‘extend and pretend’ will be to worsen the final outcome, the day of reckoning.

    “The initial deviation from the truth will be multiplied a thousandfold.” Aristotle

    The banks must be restrained, the financial and political system reformed, and balance restored to the economy, before there can be any sustained recovery.

  5. Perhaps if Harvard, Yale, etc. had better business ethics courses we would have never found ourselves in such a mess in the first place? These TBTF banks were all swindling each other and they knew it. The politicians gave them their tacit approval. Took campaign cash and now pretend to “fix” it. Unless reform includes breaking up the TBTF banks it is not going to change anything.

  6. Don’t worry about that positive feedback loop. (They all explode.) Worry about what happens next.

  7. I believe most studies would prove that multitasking is actually less efficient in humans that is basically clever people cannot be multitasking. If you are clever you do things one at a time…
    Beware in any case also of women or perhaps our own wives claiming that women are better at multi-tasking. I have never seen such evidence or correlation between multitasking and sex.

  8. Women are “better” at multi-tasking to the extent that they’ve applied for traditional feminized labor where the expectation is that “their” job couldn’t possibly be so critical and mentally taxing that they can’t also simultaneously service everyone else’s needs, on demand.

    That’s the expectation, so there it is: such people “multi-task.”

    If you just “have a lot of work to do” there is really no *need* to multi-task, per se, in order to get it done.

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