And George Will is worried and unhappy:
If in four weeks a president-elect Mitt Romney is seeking a Treasury secretary, he should look here, to Richard Fisher, president of the Federal Reserve Bank of Dallas. Candidate Romney can enhance his chance of having this choice to make by embracing a simple proposition from Fisher: Systemically important financial institutions (SIFIs), meaning too-big-to-fail (TBTF) banks, are “too dangerous to permit.”..There are 6,000 American banks, but “half of the entire banking industry’s assets” are concentrated in five institutions whose combined assets amount to almost 60 percent of the gross domestic product. And “the top 10 banks now account for 61 percent of commercial banking assets, substantially more than the 26 percent of only 20 years ago.”..
Capitalism — which is, as Milton Friedman tirelessly insisted, a profit and loss system — is subverted by TBTF, which socializes losses while leaving profits private. And which enhances the profits of those whose losses it socializes. TBTF is a double moral disaster: It creates moral hazard by encouraging risky behavior, and it delegitimizes capitalism by validating public cynicism about its risk-reward ratios.
It is inexplicable politics and regrettable policy that Romney has, so far, flinched from a forthright endorsement of breaking up the biggest banks...
The fact that Fisher ran for the US Senate as a Democrat in 1993 may keep him from being nominated as a Cabinet member by a Republican President.
Quotes Friedman, then calls for the USG to break up banks. Wow.
America's problem isn't big banks it's actually that there regulatory system encourages many tiny banks that can't move capital across borders. They are undiversified and easily fail. Canada has several large banks and they aren't in trouble.
The broke up Bell Telephone, why not Bank of America?
LAS said: "America's problem isn't big banks it's actually that there regulatory system encourages many tiny banks that can't move capital across borders."
Which translates to government doing things it shouldn't be doing. Still got a problem with smaller government doing less things, LAS?
Besides, you're wrong. Too big to fail banks are not an unintended consequence of ill advised regulations. They are the intended consequence of the regulations. Rules get made to allow banks to become part of the state, and are thus protected by the state. Free money.
Should have let them fail in the first place, as any other business which showed a balance sheet that was that bad would have.
No such thing as "too big to fail", but while we are on the subject, why no punishment dealt out to those whose decisions lead to a house of cards that could be taken down that easily?
And here he goes again:
1. Shut down the FED. There is no more need for a centrally planned money than there is for centrally planned lettuce supply.
2. End legally sanctioned fraud in the form of fractional reserve banking. This will radically reduce the financial sector and return banking to simple fee for service: a fee for safe storage.
3. Restore the gold standard OR
4. Institute free banking (look it up) which could still be fractional reserve but a highly disciplined one (disciplined by depositors).
LAS is certainly right about BIGNESS per se. In a free market bigness need not be a problem and will not be a problem if the small-player-killing regulation is removed.
Remember they broke up Standard Oil for delivering unprecedented innovation and lower prices. And they (competitors) tried to break up Microsoft. There is nothing inherently wrong with bigness as long as big operations don't restrict supply and thereby raise prices.
MY CURRENT READ:
G. Edward Griffin's The Creature from Jekyll Island. It's a corker, a splendid book for the general reader.
NONE OF THIS WILL HAPPEN which is why it doesn't really matter who wins the election except for the deliciousness of seeing Obama humiliated.
Walmart, Exxon Mobil and Apple are large, successfully run businesses. Who says large corporations cannot be competitive and are destined to implode unless bailed out?
it doesn't really matter who wins the election
Absolutely.
Tweedle Dee will beat Tweedle Dumb. Conventional wisdom has it that the Mormon will beat the Moron.
Goldman Sachs will be the real winner.
"Restore the gold standard..."
This is not the solution some believe. If true then it should follow that Japan should be poor because they do not have oil and Venezuela should be rich!Which it is not.
Public policy determines the advancement and creativity of a countries economy.
Sound money is the answer...not the "funny money" produced by western banks at the blessing of governments they have paid for.
ivbinconned, a gold standard is not essential.
Sound money doesn't require it.
Hayek didn't insist on it, but he advised some kind of "basket of commodities" standard.
But it does add to the probability of making money sound. Our political criminals can't create the stuff at will. And, despite the rampant propaganda, a gold standard is NOT deflationary -- unless it's pegged at the wrong price which Great Britain did after WW1.
Really, paraphasing another well-accepted saying, "separation of money and state" is essential. Until that time all this politics is just so much spectator sport. Well, separation of pretty well everthing and state except security and defense and some libertarians even question this.
Hayek argued for the de-nationalizion of money writing a thin volume by that name.
Government didn't give us money and should have nothing to do with it whatsoever. It should enforce contracts.
de-nationalizion of money!
The joo-haters will love that brilliant typo.
Denationalization of course.
Doesn't America enforce its anti-trust Laws anymore. or apply them to Banks?
I believe "Too Big To Fail" is anathema to Romney, and certainly Ryan. They have to play soft for political reasons. That's reality. Unfortunately.
Anti-dog eat dog and equality of opportunity legislation. It's almost like reading a book.
Still got a problem with smaller government doing less things, LAS?
I see you're nearly as incapable of honest argument as ET.
fractional reserve banking
There is nothing fraudulent or otherwise wrong about FR banking as long as the conditions are clear to the depositor.
I forget who came out on TV with the very correct and witty observation that
Obama's biggest fundraisers work on a given floor at Goldman Sachs, the one
just above or below the floor where Romney's biggest fundraisers working for
Goldman Sachs are located.
.
There must be some professional biologists among the readership. Could one of them comment upon "too big to fail" when it comes to a single organism? How long into its life cycle does, say, a blue whale reach its maximum size? How much longer does it usually live afterwards. Why? Is there such a thing as "too big to die" in the field of biology, or would "too big to life" be a more accurate statement?
"too big to life".... oy! "too big to live".
Only one or two of the SIFIs were in trouble and only one likely would have failed. The others had bailouts foisted upon them. The vast majority of bank failures were medium sized, adolescent banks.
It was not the size or the complexity that threatened our financial system, but rather the implicit and explicit incentives offered up by government. This was a REAL ESTATE crisis fomented by government policies that permitted and encouraged wanton extension of credit and production of opaque and systematically risky assets.
Without a government housing policy that began in 1996 under Clinton which was fed by government sponsored enterprises, this would not have happened at all.
Liberals blame deregulation which has no evidentiary support. Even so, an analogy would be removing speed limits, stop signs, and traffic lights. While accidents would go up, people would quickly figure out that speeding through an intersection is a dangerous strategy. The laws of natural selection would prevail. Having lived in countries that had no traffic controls, I witnessed that it did not become a free for all.
Ah, but if government started to REWARD people for violating existing traffic laws and removed liability for accidents, that's when you would see the death spiral. Evidence: gold rushes, Somalia, Rwanda, Zimbabwe, etc.
Absent an incentive or safety net, people tend to take great care of their own affairs. Many people must be induced to make stupid decisions.
LAS said: "I see you're nearly as incapable of honest argument as ET."
I see you're still incapable of answering a simple yes or no question, LAS. When I see that it usually means the person is much more interested in name calling than rational discussion.
Thank you Reginald @ 3:05 pm. I really appreciate the excellent analogy.