A Growing Split Within Republicans On Too Big To Fail Banks

By Simon Johnson

An interesting debate is developing within the Republican Party on how to approach the problem of too-big-to-fail financial institutions.

On the one hand, a growing number of influential voices are pushing for measures that would limit the size of megabanks or even push them to become smaller. Richard Fisher, president of the Federal Reserve Bank of Dallas, continues to draw a lot of attention, as does Thomas Hoenig, the former president of the Federal Reserve Bank of Kansas City and now vice chairman of the Federal Deposit Insurance Corporation. And Jon Huntsman planted a strong conservative flag on this issue during his run for the presidency in 2011.

This assessment is now shared much more broadly across the right, as seen in recent opinion pieces by George Will and Peggy Noonan, as well as regular analysis by James Pethokoukis of the American Enterprise Institute, including on the issue I write about today. See this Holiday 2012 survey, provided by the Dallas Fed, with links to views in favor of and against breaking up the big banks.

Senator David Vitter of Louisiana and Jim DeMint, the former senator from South Carolina who now heads the Heritage Foundation, have also come out hard against very big banks. Both men are usually considered to be in the right wing of the party.

But some other Republicans are pushing back, as seen this week in a paper by Hamilton Place Strategies, a group headed in part by communications professionals who previously worked with President George W. Bush, John McCain and Mitt Romney. (The people involved insist that it is not a Republican firm. Of its five partners, four previously had senior Republican jobs, while the fifth worked for Hillary Clinton and other Democrats. Of its three managing directors, two have worked for Democrats and one was a senior staff member on the Romney campaign. Historically, of course, deference to big banks is bipartisan.)

Can Hamilton Place Strategies help turn the tide within Republican thinking? This is not likely, because its paper is not credible and should not be taken seriously for three reasons.

First, it fails to deal with the most important recent work showing the problems with big banks. For example, it essentially ignores the analysis of Andrew Haldane and his colleagues at the Bank of England, which finds no economies of scale and scope for the world’s largest financial institutions (the paper mentions the finding that economies of scale do not exist above about $100 billion but does not go into the specifics of this result). I see no mention of Richard Fisher and Harvey Rosenblum of the Dallas Fed, who explain clearly how megabanks weaken the effectiveness of monetary policy and undermine United States influence over all aspects of our financial system (a direct counter to one main point of the Hamilton Place Strategies paper).

The paper makes vague assertions about bank equity capital now being sufficient to withstand future adverse shocks, but it fails to take on any of the many concerns raised by Anat Admati and her co-authors, which are increasingly gaining traction. Professor Admati and Martin Hellwig have a new book, “The Bankers’ New Clothes,” which will be introduced on Monday at the Peterson Institute for International Economics (where I am a senior fellow); excerpts have been posted on Bloomberg. Anyone who wants to be taken seriously in this debate needs to read the book (and the technical papers already available).

Second, Hamilton Place Strategies denies the existence of too-big-to-fail subsidies for global megabanks. This is laughable. Has it talked to anyone in credit markets about how they price various kinds of risk – and assess the willingness and ability of the government and the Fed to support troubled megabanks? Or have its authors read the report on the SAFE Banking Act, produced by the staff of Senator Sherrod Brown, Democrat of Ohio? The International Monetary Fund, the Bank of England and other sources cited there put the funding advantage of too-big-to-fail banks at 50 to 80 basis points (0.5 to 0.8 of a percentage point, which is a lot in today’s market).

Such subsidies encourage big banks to borrow more – to take more risk and to become even larger.  The damage when such a bank fails is generally proportional to its size.  So this implicit taxpayer subsidy creates serious risks for the macroeconomy and contributes to the further build-up of taxpayer liabilities – when any financial system crashes, that causes a recession, reduces tax revenue, and pushes up government debt.

Even William Dudley, the former Goldman Sachs executive who now heads the Federal Reserve Bank of New York, acknowledges that too-big-to-fail and its associated subsidies continue. Daniel Tarullo, the lead Fed governor for financial regulation, is in the same place. (Again, neither is cited in the Hamilton Place Strategies document.)

Hamilton Place Strategies contends that large banks can be resolved – taken through liquidation by the F.D.I.C. without difficulties – and that the “living wills” process helps to provide a meaningful road map. I talk to people closely involved with these issues, officials and private-sector participants (as a member of the F.D.I.C.’s Systemic Resolution Advisory Committee and as a member of the Systemic Risk Council, led by Sheila Bair, the former chairwoman of the F.D.I.C.). Hamilton Place Strategies is completely wrong on the substance here.

Hamilton Place Strategies also asserts that global megabanks are an essential part of a well-functioning international economy. Again, I don’t know where this comes from. As part of my work at the Massachusetts Institute of Technology and at the Peterson Institute, I talk with people who run companies, large and small, operating around the world; they emphasize that they need financial services provided by well-run institutions and markets that have integrity.

Putting too-big-to-jail banks in charge of financial flows helps no one – except, presumably, the executives at those banks that the Department of Justice has determined are immune from criminal prosecution.

Third, the Hamilton Place Strategies “report” reads as if it is either some form of paid advertising or a sales pitch to potential clients — but the firm refuses to disclose for whom it is working and on what basis.

In response to an e-mail request for such information, Patrick Sims of Hamilton Place Strategies replied:

“While we don’t publicly disclose our individual clients, we make no secret that we do work for large financial institutions, both foreign and domestic, and related associations. It would be fair for you to note that in your writing. But the views expressed in the paper represent the longstanding views of the firm.”

I’m not sure what “longstanding” means, as the firm was founded in 2010. But in any case, this lack of disclosure completely destroys the credibility of Hamilton Place Strategies and its work in this area.

The firm is in the business of influencing opinion. As it says prominently on its Web site, “We show clients how to shape opinion, navigate challenges, make informed decisions and create opportunities.”

While the firm’s clients in this area may not be clear, the language in its report strongly resembles arguments being made by the Financial Services Forum and other lobbying groups for large banks.  For example, an unsigned blog post on the Financial Services Forum’s Web site from November 2011 has the same arguments and similar wording to what is in the Hamilton Place Strategies report. (It also objects to an earlier commentary I wrote.)

Perhaps all this is a coincidence; the firm has not yet been willing to discuss these points.

When I acquainted the firm with what I was writing in this post and sought comment, the only substantive reaction was a request not to characterize it as a Republican firm.

We have seen deceptive lobbying, posing as objective “research,” many times in the financial reform debate – for example, the case of Keybridge Research on derivatives, which I wrote about in 2011.

If a company’s lawyer is quoted in the press, the report will always include mention of the client-lawyer relationship. Everyone is entitled to a spokesperson.

Law firms are not afraid to tell you whom they represent. After Charles Ferguson’s Oscar-winning movie, “Inside Job,” many academics now disclose when they produce a paper on behalf of an industry association (e.g., Darrell Duffie of Stanford disclosed that he was paid $50,000 by the Securities Industry and Financial Markets Association, a lobbying group, to write a paper opposing the Volcker Rule). Karen Shaw Petrou, a leading banking analyst with whom I have also disagreed on too-big-to-fail issues, discloses “selected clients and subscribers” in some detail.

Upton Sinclair once quipped, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”

Hamilton Place Strategies’ decision not to disclose who is paying for its “research” is far more significant than all the errors in its white paper.

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce the entire column, please contact the New York Times.

50 thoughts on “A Growing Split Within Republicans On Too Big To Fail Banks

  1. With the recent disclosure by Mr. Dimon of the “money room” at Chase in Florida moving “4 or 5 $$$ trillion a day”, it is hardly conceivable that big banks are going to be pared down to size any time soon. Power is too concentrated, in the hands of too few.

  2. cut and pasted from the wiki article:

    “….Some, such as former International Monetary Fund chief economist Simon Johnson even went so far as to argue that the increased power and influence of the financial services sector had fundamentally transformed the American polity, endangering representative democracy itself.[7]

    In February 2009, white-collar criminologist and former senior financial regulator William K. Black listed the ways in which the financial sector harms the real economy. Black wrote, “The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation.”[8]…..”


    So if Prof. Johnson says, “Again, I don’t know where this comes from.”

    Then that could mean that whoever is saying it doesn’t know what they are talking about :-))

    @Bond, “Power is too concentrated, in the hands of too few.”

    And they are free to blow themselves up with the power that they have.

    The question I have is whether they have the right to blow up the web of sustainable life on the planet that runs itself through commerce and trade transactions?

  3. Posited:
    “Among us today a concentration of private power without equal in history is growing.”

    “Private enterprise is ceasing to be free enterprise and is becoming a cluster of private collectivisms; masking itself as a system of free enterprise after the American model, it is in fact becoming a concealed cartel system after the European model.”
    “And industrial empire building, unfortunately, has evolved into banker control of industry. We oppose that.”
    “We have also learned that a realistic system of business regulation has to reach more than consciously immoral acts. The community is interested in economic results. It must be protected from economic as well as moral wrongs. We must find practical controls over blind economic forces as well as over blindly selfish men.”
    Excerpted from:
    Faculty Research
    The New Deal
    Franklin D. Roosevelt Speeches
    Message to Congress on the Concentration of Economic Power
    Franklin D. Roosevelt
    April 29, 1938
    To the Congress of the United States:

  4. The Case For and Against Too-Big-to-Fail Banks
    “The case for the too-big-to-fail banks, by Neil Irwin: …[I]n the last few months, there’s been a new wave of calls to break up the “too big to fail” banks that were at the center of the crisis — and the beneficiaries of a massive wave of bailouts.

    So, is splitting those banks up the answer? … The move … has a growing list of powerful allies. … But what is the counterargument? … A new paper from Patrick Sims of Hamilton Place Strategies, a policy and communications firm led by Bush administration White House and Treasury official Tony Fratto, amounts to a case for the big banks. (Hamilton Place counts major banks and their trade associations among its clients)…, here are some of the arguments…”

  5. “Can Hamilton Place Strategies help turn the tide within Republican thinking? This is not likely, because its paper is not credible and should not be taken seriously for three reasons.”

    While the paper is not credible and should not be taken seriously, that fails to relate to the question. Since when has credibility determined the effect of a document on politics?

  6. http://www.theamericanconservative.com/articles/revolt-of-the-rich/
    (A Growing Split…with integrity & insight)
    “Almost all conservatives who care to vote congregate in the Republican Party. But Republican ideology celebrates outsourcing, globalization, and takeovers as the glorious fruits of capitalism’s “creative destruction.” As a former Republican congressional staff member, I saw for myself how GOP proponents of globalized vulture capitalism, such as Grover Norquist, Dick Armey, Phil Gramm, and Lawrence Kudlow, extolled the offshoring and financialization process as an unalloyed benefit. They were quick to denounce as socialism any attempt to mitigate its impact on society.”
    ” Conservatives need to think about the world they want: do they really desire a social Darwinist dystopia?

    The objective of the predatory super-rich and their political handmaidens is to discredit and destroy the traditional nation state and auction its resources to themselves. Those super-rich, in turn, aim to create a “tollbooth” economy, whereby more and more of our highways, bridges, libraries, parks, and beaches are possessed by private oligarchs who will extract a toll from the rest of us. Was this the vision of the Founders? Was this why they believed governments were instituted among men—that the very sinews of the state should be possessed by the wealthy in the same manner that kingdoms of the Old World were the personal property of the monarch?”
    Revolt of the Rich
    Our financial elites are the new secessionists.
    By Mike Lofgren • August 27, 2012

  7. Muppets rearranging chairs on the Titanic, while the band plays on. Whatever. The danger to the global economy has never been more palpable. The last place anyone looks for change and hope is Washington. At this juncture, people would do well to accept that there is nothing that will save the global economy from the fate of monumental greed embodied by the TBTF banks.


  8. “The damage when such a bank fails is generally proportional to its size.”

    Here, I cannot agree. It is much worse than that. A bank two times bigger will do more than twice the damage when it fails.
    In wonkish terms, the consequences of a failure are convex, and it is (or should be) one of the main arguments for breaking the big banks.

  9. What we’re seeing here is a repeat of the debate that played out between Roosevelt/Taft and Wilson a hundred years ago – trust busting vs. regulation. I thought this debate had been settled, such that it was recognized that some circumstances call for breaking up monopolies, others for regulation, and still others for both. Apparently not. Though I suspect that, in this rendition, both sides are being disingenuous in their arguments because in actuality they oppose both approaches.

  10. A great article, but missing Simon’s normal clarity of message. It start with a polarizing and prickly headline “A Growing Split Within Republicans On Too Big To Fail Banks”, but hardly addresses that.

    But then it analyzes the “Hamilton Place Strategies”, which is obviously a paid opinion piece masquerading as independent opinion, and demolishes it accurately. How do we set standards or expectations so that paid-for-speech is easily seen to be what it is, and valued for what it is: largely worthless?

  11. Does this argument hold also for Fannie Mae (and Freddie Mac)? Fannie was the country’s largest borrower, behind only the Treasury at one time.

    Its lobbyists always managed to trump the concerns over its size, of Larry Summers, Phil Gramm, Ronald Reagan, Paul Volcker, Alan Greenspan, Jim Leach (to name just a few). Their winning argument being that their size made interests rates lower for home purchasers.

    I missed the part where the GSEs were included in TBTF.

  12. What it must be like to be Professor Johnson and know what he knows. Very few manage to still sleep at night with that knowledge. Prepare, people.

  13. Trusted Criminals: White Collar Crime In Contemporary Society [Paperback]
    David O. Friedrichs (Author)

    Trusted Criminals: White Collar Crime In Contemporary Society by David O. Friedrichs (Jun 25, 2009)

  14. The Revolt of the Elites and the Betrayal of Democracy [Paperback]
    Christopher Lasch (Author)

  15. ““I’m saying that there is a 90% chance of collapse by next April, but it could happen at any time between now and April,” Keiser reported on August 17. “You have to look at [the global economy] in terms of the way a systems analyst would look at any complicated system. Every time you add more to the system the complexity doesn’t rise in a linear fashion, it rises exponentially. So every time the Fed puts on more quantitative easing, every time investment banks bail out some other investment bank, every time more derivatives are released into the system, you don’t go from, let’s say, 700 trillion notional value derivatives to 800 trillion in a linear way. You have to think of it in terms of this global quadrillion to two quadrillion derivative soufflé being encumbered with, exponentially, more risk. This is classic systems analysis.”

    This nation’s economy has been growing in complexity, exponentially, since 1971 when the U.S. dollar was taken off the gold standard. “The game here is to try to pick where it starts, what is the trigger, and to study it in terms of how the economies rattle and roll, as a result of this complete and utter systemic breakdown,” continued the founding host of The Keiser Report, a biweekly program, that aired its 330th episode yesterday.

    Could Japan trigger the global economic collapse?

    Keiser looks to the economy of Japan as a “weakest link” and a possible trigger for systemic collapse. He says what turned his eye toward Japan was the recent announcement that the second biggest buyer of U.S. Treasury debt is no longer China. Keiser explains, “America is the biggest buyer of its own debt. But taking the second spot is Japan. China is walking away from the table.”

    Keiser continues, “Japan has always been under the treasury of America’s thumb. They will do whatever America says. And now they are the number two biggest buyer [sic] of US Treasury bonds. But that is extremely dangerous because their economy itself is a tinderbox, probably the weakest, most fragile economy in the world—after the Fukushima disaster, after 20 years of the zombie economy and the zombie banks. But now they are supporting America. Japan, the zombie economy, is supporting the American economy, to give you an idea how fragile the system is.”

    “There is no avoiding the collapse. There is no remedy for the collapse.”

    He then predicts civil unrest and a generational civil war. Therefore, the government is preparing for civil unrest, long anticipated by the John Warner National Defense Authorization Act of 2007, which rewrote federal law to allow deployment of the military, specifically, in cases of “economic collapse.”

    After describing our evolving “hard gulag” situation in this country with private prison systems increasing capitalization, expecting 20-50 million more inmates in the near future, Keiser defines a new type of dystopia he calls a “soft gulag,” where citizens give up more freedoms—such as facial recognition—in exchange for deals on consumer goods.”


  16. After reading Irwin’s tout of Hamilton’s PR flakery, I wrote him an email. In it, I pointed out how much deception was involved in the use of correlation to explain away the MBS risk. I also pointed him off to the research that shows how the financial houses and their quant lackeys are part of a dynamical marketplace that will explode again. This is no longer about house A competing against house B for some perceived marginal gain. It’s about the entire market place cycling between periodic bursts of wildly excessive risk-hypnosis punctuated by market-destroying bouts of de-leveraging. It really is all systemically one, just as the hippies were fond of saying. They were just ahead of their time.

    There’s a lot going on. The Bank of England appears to have taken the lead on this. Led by Andrew Haldane, they’re rethinking their risk management given what they now understand about the dynamics of the marketplace for derivatives, and the British government seems to be moving this along. The bankers don’t seem worried but I think they’ve missed the boat – again.

    This undercurrent, with the Fed deferring to the Bank of England in developing new strategies, has been flowing through the scientific and policy community for a while. There’s been a gradual ratcheting up of both the regulatory talk, and policy visibility. There are quite a few links in one of Felix Salmon’s blog entries, with lots of opinion’s on both sides: http://blogs.reuters.com/felix-salmon/2013/02/04/counterparties-volcker-with-voltage/

    I might be delusional, but I don’t think so. It’s all happening at a glacial pace for a very simple reason. This house of cards could easily collapse again if any fast moves are made, it’s that dangerous.

    With the ouster, pardon me the resignation, of Lanny Breuer from the Justice Department, we’re also hearing much tougher talk and the initiation of criminal litigation. Eric Schneiderman seems like a serious guy. He’s now stepped to the front as the point-man for this effort. At the very least, he doesn’t seem to have any illusions about what went down:

    There was lots of talk about how Frontline did a hit job on Breuer. I certainly hope so. That may not have been a random targeting either. It really was time for him to move on given his fawning approach to the criminal activity that led to this collapse. Again, everything has moved very slowly for what seems to me the obvious reason. There is no solid ground, only wall-to-wall eggshells in this oh-so-weak recovery.

    There are endless questions to be answered all of them leading to the only important one: can we have a consumer economy without consumers? But we’ll save that for another day.

  17. We insist you remove that wig and fake moustache at once private Ryan.
    Well I can’t sir, it’s growed on.

  18. Bubble Psychology and Complicity in Financial Fraud
    By Noah Millman • February 7, 2013, 11:38 AM
    (Recent article in the American Conservative) Quite a good point!
    Essentially the author points out that buyers in a black market that expect to turn a profit themselves on questionable goods and their sources, simply don’t want to know too much information…which indirectly makes the buyers complicit to the corruption. It is a good article and raises a more comprehensive perspective as to the nature of a corrupt bubble posing as institutional and normative errors.
    ….Neither a borrower nor a lender be? …Well in contemporary jingo…it’s more like “…Off the record, on the QT, and very hush-hush…”
    But Noah Millman goes further to raise eyebrows and ask academia for help in answering it…(perhaps a future Baseline title issue?):
    ….I’d be interested to know whether there’s any academic literature addressing this question of opacity/complexity and its relationship to bubbles.”
    “In any bull market, the willingness of intermediaries to “conceal materially relevant information” goes up, and so does the willingness of risk-takers to let that information be concealed. It’s very hard to regulate away that behavior – doing so would be tantamount to regulating away bubble psychology. But how possible it is to conceal this kind of information is a function not only of the regulatory environment (which also gets laxer during bubbles – bubble psychology works on regulators, too) but of the nature of the products themselves. Credit securitization provided multiple opportunities to inaccurately represent risk, each of which was seized by somebody, and which collectively resulted in a much more substantial mis-representation than would have been the case with simpler products.
    I’d be interested to know whether there’s any academic literature addressing this question of opacity/complexity and its relationship to bubbles.”
    Bubble Psychology and Complicity in Financial Fraud
    By Noah Millman • February 7, 2013, 11:38 AM
    (Recent article in the American Conservative)

  19. “And Jon Huntsman planted a strong conservative flag on this issue during his run for the presidency in 2011.” (text above)
    P “rebuilder-in-chief” with an eye toward 2016.”
    A Growing? split…seems retrospective. The conservatives are driven by party politics and political bosses are labeling working conservatives as outsiders. There isn’t (or shouldn’t be…) a novel split in the “Party” but the extreme fundamentalists in the tea party helm have factioned and fractured as the lobby-driven fiscal conservatives have made hypocrites out of true social conservativism. Meanwhile, anything labeled moderate takes on a mantel of rejection from the political bosses that feed off of the extremist’s absolute intolerance for outsiders (left undefined as everyone else). So we end up with Mitt Romney instead of a true leader and politician like Jon Huntsman. Given the choices, as a life long Democrat I would have accepted Huntsman as a compromise with a true intention to lead the people, rather than take another beating from Obama’s three ring Monty circus of crisis derailing promises and false appeals to empathy that sells his image while we become entrenched in suspended disbelief at his actions.

    So heads up Conservatives, you have been split all along and the entire country is becoming factioned and fracked into corruption and pollution. You don’t need a change of heart; you need a complete heart transplant. A virtual revolt against the capture of your party by “nuts” and bolts political animals serving a financial minority. You may still get a second chance to rally around a real candidate that would not only be your “rebuilder-in-chief” but may well reunite America and save Democracy from corporatism and oligarchic command restructuring of the Republic itself.

    Whither Jon Huntsman?
    Posted by Sean Sullivan on January 14, 2013 at 3:32 pm
    “Written off as too moderate by conservatives and crowded out by Mitt Romney among centrist Republicans, Huntsman was a man without a political home in the 2012 primary field.

    Looking ahead to 2016, he still is, in many respects.

    After the primary, Huntsman had some tough talk for his party, lashing the GOP over immigration and even taking on Romney’s policies. He’s kept up his tough love the past few months, telling the The Ripon Forum last month: “As long as compromise is seen as something akin to treason, it becomes impossible for us to move the policy ball forward.”

    In the wake of Romney’s controversial “47 percent” comment and post-election remark that Obama won by bestowing “gifts” upon certain voters, Huntsman is not the only one in the Republican Party calling for a new message. And given the way the way the public views the GOP these days, few would argue that a makeover isn’t in order.

    As we’ve written, there is already a race to be the
    GOP “rebuilder-in-chief” with an eye toward 2016.”

  20. Simon, Hamilton Place Strategies is simply another plutocratic shill for the same old financial oligarchs who keep working to rip out the throats of global investors. I am far from convinced that the Dodd-Frank enactment did anything substantial to avert future catastrophic financial occurances. Hell, we aren’t even close to making regulation based upon the law, let alone sufficiently staffing the enforcers or budgeting them for effectiveness. Pays to have friends in high places? Goldman, etal, define that principle. And, it isn’t just the endless risk high volume proprietary trading that bothers me, but the fact that the derivatives market has grown exponentially without any regulation in the law to more that a qaudrillion of notional value, if not twice that size. Who cares about TBTF, when these absurd investment gambles represent a potential for near term financial holocaust!! Who can bail out the world, when everything fails?

  21. Cultures and Organizations, Software of the Mind: Intercultural Cooperation and its Importance for Survival
    Geert Hofstede (Author)
    From the Back Cover
    The Classic Work on “Groupthink”-now in paperback! Since its original hardcover publication, this trailblazing work has stirred a response so deep and wide that its subtitle has become part of our language. Now for the first time in paperback, Geert Hofstede’s study of the “software of the mind” helps us look at how we think-also at how we fail to think as members of groups. Drawing on decades of rigorous research, the author reveals the unexamined rules by which we live and work together. Melding unswerving intellectual courage and hard social, cultural, and organizational research, Hofstede shapes a sobering picture of a world perilously lacking in self-knowledge-unaware of serious difference between the groups that populate our planet and appallingly oblivious to the hidden “programs” that govern the behavior of cultures in a time of skyrocketing global contact. But culture shock-whether the shocking contact is between an individual and a new country, between organizations, between the sexes, or between opposing diplomats-can be turned to our advantage, Hofstede says-if we understand it. And understanding is what this work is all about. This is a book that every thinking person will want to read. Broad in scope, profoundly original in thought and profoundly important, it offers vital knowledge and insight on issues that will shape the future of our individual and collective lives. and profoundly
    See all Editorial Reviews

    Cultures and Organizations, Software of the Mind: Intercultural Cooperation and its Importance for Survival

  22. How about this for a research project for a econ student:

    When most people read “The damage when such a bank fails is generally proportional to its size.” they think that this quote describes a linear relationship. (i.e. if a bank of 2X in assets fails and the impact on the economy is 2Y, then if a bank of 4X fails the impact will be 4Y.) I would think the relationship is more likely to be logarithmic. More like the richter scale for earthquakes.

    Has someone actually tried to compile actual data on something like this? (versus economic models based on a bunch of assumptions which may or may not be valid)

  23. The Coming Collapse of the Middle Class
    Jan 31, 2008
    Distinguished law scholar Elizabeth Warren

  24. (British spellings from original [sic])
    “In 1943, in an analysis of Hitler’s programme in the Quarterly Journal of Economics, the word ‘privatisation’ entered the academic literature for the first time. The author, Sidney Merlin, wrote that the Nazi Party ‘facilitates the accumulation of private fortunes and industrial empires by its foremost members and collaborators through “privatisation” and other measures, thereby intensifying centralisation of economic affairs and government in an increasingly narrow group that may for all practical purposes be termed the national socialist elite’.The gung-ho free marketeers who rode to power with Thatcher in 1979 don’t seem to have been aware of the Nazi prelude, although they would have known of later privatisations in Pinochet’s Chile.”

  25. http://www.prwatch.org/cmd
    The Center for Media and Democracy is a non-profit investigative reporting group whose work aids public awareness about the people, companies, and groups attempting to shape the media and our democracy. Founded in 1993, our national reporting and analysis focus on exposing corporate spin. We accept no funding from for-profit corporations or the government. The Center for Media and Democracy’s websites are PR Watch, SourceWatch, BanksterUSA, ALECexposed and Food Rights Network.

  26. Too-Idiotic-to-Jail Professors like Simon and Anant will write anything for a quick buck and to sell books.

    Will Simon and Anat disclose their earnings from MIT and Stanford when they are also spending time writing books, useless columns and TV talk shows?

    Simon’s second retort against the Hamilton Place Strategies paper is too ludicrous to be true. Isolating the funding advantage of a large firm to ‘government subsidies’? Haha. I really wonder how MIT keeps subsidizing this man!.

    IBM 5Y CDS is quoted at 34 bps. Intel 5Y CDS is quoted at 55 bps.

    Does IBM have the implicit backing of the government? Ha Ha

    Research funded by (stolen from) unknowing students at MIT and Stanford is not a prerequisite for accuracy.

    Simon is too-connected-to-deport because of his friends in high places (i.e. elisabeth warren)

  27. Sorry there Old Desi Girl…you’re off the reservation (and your meds…) and completely out of line with the new Republican consensus.
    The Republican talking points are clear…we must keep our immigration population….. so Simon will not be deported as you demand (slightly aside…pssss…dope! He’s a “citizen!).

    “Hamilton Place Strategies, a Washington research group, argued in a recent paper that low-skilled immigrant workers in agriculture also boost the economy by increasing work for Americans in other sectors, such as transportation and marketing.

    Republican Senator Marco Rubio, who was picked by his party to respond to Obama’s speech late Tuesday, also emphasized the economic benefits of immigration reform.”
    “We can also help our economy grow if we have a legal immigration system that allows us to attract and assimilate the world’s best and brightest,” said Rubio, a son of Cuban immigrants who is working to forge a bipartisan immigration bill in the Senate.”

  28. “Too Big to Fail has become Too Big for Trial”
    Senator Elizabeth Warren·3 videos
    Published on Feb 15, 2013

    Senator Elizabeth Warren asks federal bank regulators why no banks were taken to trial in the aftermath of the financial crisis.

  29. At the risk of sounding political, Republicans will fall in line with whatever lobbyist/plutocrats decide. As far as a viable system, size is not the key issue. The key issue is reasonable and regulated risk, with regulated insurance and reinsurance on all risk taking.
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    suggestions are always welcome. Thank you,
    USA: Politics, Economics and International Issues

  30. Anyone who worked for the den of viper and thieves and wanton warprofiteers in the fascist bushgov is suspect!!! How can they be trusted since every single policy, directive, word, and deed of the pathological liars and fascists in the bushgov was intent on deception, division, ruthless dominance, wanton profiteering, fascism, and savage advancement and shielding of the predatorclass and predatorclass oligarchs exclusively. These shaitans and their broods can NEVER be trusted or believed on any subject unless you are fascist, redneck, religios fanatic, wingnut, or predatorclass. Now I know all the sensitive erudite adults visiting this blog will dismiss my commentary as incendiary or insane other other such dispersions, – but I dare any of you to counter my positions on the merits. You have now, did not then, and never will have any grounds to stand on. The bushgov was a fascist regime that gutted poor workingclass Americans, raped, dismantled and redefined that thing we call the Constitution, shamed America and the ruleoflaw, and hurled the nation into the most severe, longest lasting economic crisis since the Great Depression. So any commentary, white paper, research, or criticism from anyon affiliated with the fascists chickenhawk warmongers and wanton profiteers in the bushgov must always and forevermore be dismissed, denied, ridiculed, and condemned. No one can reasonably challenge or refute these assertions, but I welcome the debate!!!

  31. http://www.commondreams.org/headline/2013/02/21-6
    Published on Thursday, February 21, 2013 by Common Dreams
    Investigation Finds High-Class, Crisis-Peddling ‘Astroturf Supergroup’ Behind ‘Fix the Debt’ Campaign
    New investigative project looks to expose deficit debate subterfuge pushed by Pete Peterson, Erskine Bowles and Alan Simpson
    – Jon Queally, staff writer

    “A new online resource launched on Thursday aims to show that behind the scenes of the ongoing fiscal battles in Washington—including the current fight over ‘sequestration’—a billionaire-funded and CEO-backed media campaign is operating as an ‘astroturf supergroup,’ using its outsized pocketbook and influence to peddle long-discredited policy prescriptions for the ailing economy.”
    Read full article:

  32. http://www.sourcewatch.org/index.php/Portal:Fix_the_Debt

    Wall Street billionaire Pete Peterson is scheming to “Fix the Debt,”
    but if he wins, we lose.
    Learn more at our new SourceWatch resource: PetersonPyramid.org

    The Campaign to Fix the Debt is the latest incarnation of a decades-long effort by former Nixon man turned Wall Street billionaire Pete Peterson to slash earned benefit programs such as Social Security and Medicare under the guise of fixing the nation’s “debt problem.” Through this special report — and in partnership with The Nation magazine — the Center for Media and Democracy exposes the funding, the leaders, the partner groups, and phony state “chapters” of this $60 million “astroturf supergroup,” whose goal is to achieve a grand bargain on austerity by July 4, 2013.[1]

  33. http://www.sourcewatch.org/index.php/Portal:Fix_the_Debt
    Peter G. Peterson has long used his wealth to underwrite numerous organizations and PR campaigns to generate public support for slashing Social Security and Medicare, citing concerns over “unsustainable” federal budget deficits. Full of apocalyptic warnings, Peterson failed to warn of the $8 trillion housing bubble, but conveniently sold his private equity firm Blackstone Group on the eve of the financial crisis. He later pledged to spend $1 billion of the money from the sale to “fix America’s key fiscal-sustainability problems,” launching the Peter G. Peterson Foundation in 2008.[2] As of 2011, the Huffington Post reported that Peterson had personally given $458 million to the Foundation.[3]

  34. http://www.thenation.com/article/173020/pete-petersons-long-history-deficit-scaremongering
    Pete Peterson’s Long History of Deficit Scaremongering
    Lisa Graves
    February 20, 2013 | This article appeared in the March 11-18, 2013 edition of The Nation.
    “Fix the Debt financier Peter G. Peterson knows a thing or two about debt: he’s an expert at creating it. Peterson founded the private equity firm Blackstone Group in 1985 with Stephen Schwarzman (who compared raising taxes to “when Hitler invaded Poland”). Private equity firms don’t contribute much to the economy; they don’t make cars or milk the cows. Too frequently, they buy firms to loot them. After a leveraged buyout, they can leave companies so loaded up with debt they are forced to immediately slash their workforce or employees’ retirement security……”

  35. Gestapo is here!
    Here they come: After months of secret negotiations with the players who pushed SOPA, the major Internet Service Providers on the verge of implementing their “Six Strikes” plan to fight “online infringement”. With essentially no due process, AT&T, Cablevision Systems, Comcast, Time Warner Cable and Verizon will get on your case if you’re accused of violating intellectual property rights — and eventually even interfere with your ability to access the Internet. (You can contest accusations — if you fork over $35.)
    Click here to tell the ISPs to back down — or that you’ll look to take your business elsewhere:
    After the first few supposed violations, they’ll alert you that your connection was engaging in behavior that they — the giant corporations that provide your Internet service — deem inappropriate.
    And then it gets really dicey: They can make it difficult for you to access the web, or start throttling down your connection.
    Click here to tell the ISPs to back down — and put them on notice:
    From Wired:
    After four alerts, according to the program, “mitigation measures” may commence. They include “temporary reductions of Internet speeds, redirection to a landing page until the subscriber contacts the ISP to discuss the matter or reviews and responds to some educational information about copyright, or other measures (as specified in published policies) that the ISP may deem necessary to help resolve the matter.”
    That’s right: These mega-corporations now claim the authority to undermine your Internet access — and want to serve as judge, jury, and executioner.
    Seech is still free…if you follow their rules…and you Pay 4-it!

  36. http://money.cnn.com/2013/02/28/news/economy/europe-bank-bonuses/index.html?iid=Lead#
    The New Europe
    Europe to cap bankers’ bonuses
    By Mark Thompson @CNNMoney February 28, 2013: 5:58 AM ET – See more at: http://money.cnn.com/2013/02/28/news/economy/europe-bank-bonuses/index.html?iid=Lead#sthash.gKl964Wr.dpuf

    Europe is planning to cap bankers’ bonuses in a bid to curb the kind of reckless risk taking that led to the financial crisis and huge tax-payer funded bailouts.

    The measure, which could take effect as early as January 2014, will limit bonuses to the level of annual salary, or twice salary given the approval of a majority of shareholders. The cap will apply globally to European Union banks, and to international banks operating within the EU.
    – See more at: http://money.cnn.com/2013/02/28/news/economy/europe-bank-bonuses/index.html?iid=Lead#sthash.lwXNahug.dpuf

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