By James Kwak

I wrote a column that went up this morning at The Atlantic about the ProPublica/This American Life story about the New York Fed. The gist of the argument is that we all knew the New York Fed was captured; for people like Tim Geithner, that’s a feature, not a bug.

There was a paragraph in my original draft that I really liked, but I can completely understand why the editors didn’t want it:

“When Tyrion Lannister wants his son killed, he sentences him to death in public. When Avon Barksdale wants potential incriminating witnesses killed, he obliquely lets his lieutenant know that he’s worried about loose ends—because he doesn’t want his fingerprints (voiceprints, actually) visible. When senior New York Fed officials want their staff to go easy on Goldman Sachs—well, they don’t need to lift a finger. The institutional culture takes care of it for them.”

This is similar to the idea at the core of “The Quiet Coup,” the Atlantic article that had a million page views back in 2009. In a less well developed political system, rich businessmen buy favorable policy by passing money under the table (or hiring politicians’ relatives, or giving them loans and then letting them default, and so on). In the United States, for the most part, you don’t have to do anything illegal: the system takes care of it for you, whether it’s bailout money from the Treasury Department or regulatory forbearance from the New York Fed. That system is a combination of personal incentives, cultural capture, and institutional sclerosis.

In short, buying politicians (or regulators) is good. Not having to buy them in the first place is even better.

By James Kwak

I’ve joined a new collection on Medium devoted to business and finance writing. It’s called “Bull Market,” after an intense lobbying campaign (including alleged vote-buying, although I haven’t tried to collect) by Felix Salmon, and includes Felix, Mark Buchanan, Dan Davies, Alexis Goldstein, Francine McKenna, Evan Soltas, and Mark Stein. The goal is to write thoughtful articles that don’t just respond to the latest story on the wire (although there will be some of that, too).

My contribution for today is a post about the no-poaching lawsuit in Silicon Valley and what it says about class consciousness in America today.

I hope you enjoy the collection.

By Simon Johnson

These days, almost everyone likes to complain about institutional corruption – and various forms of intellectual capture of government orchestrated by big corporate interests. But very few people are willing to do anything meaningful about it.

Zephyr Teachout is an exception. Not only has she written about the history of political corruption in the United States, both in long form (her recent book) and in many shorter versions (e.g., see this paper), she is competing for the Democratic nomination to become governor of New York.

In many countries, Ms. Teachout would sweep to victory. She has smart ideas about many dimensions of public policy (here are her economic policies), she has assembled a strong team, and – most of all – she represents exactly the kind of responsible reform that we need at this stage of our republic.

Elizabeth Warren offered exactly the same sort of promise to the people of Massachusetts in 2012 – real reform through pragmatic and effective politics. She has delivered on this promise and there is every indication that her influence will only grow in the years to come. Continue reading “An Elizabeth Warren for New York” →