The Conservative Case For Banking Reform
If we really want to prevent another financial crisis, Government has to admit that it’s time to reinstitute Depression-era barriers between investment banking, commercial banking, and securities trading. The simple truth is if you’re too big to fail, then you’re too big, because no amount of regulation is going to keep the biggest guy on the block from maximizing their profits at any cost if there is no true consequence for failure. Why am I bringing this up now? Because while I still think fundamental banking reform is a long-shot, when mainstream conservatives start saying it’s time to do something about the nation’s largest banks, it’s time to take notice and make sure that credit unions lend their voice to the debate.
Conservative columnist George Will, who is the intellectual heir to William F. Buckely, argued in a recent column that the size and scope of the nation’s largest banks amounts to a government subsidy that allows them to provide services more cheaply than community banks. He could have added credit unions, but I guess you can’t ask for everything. He argued that “by breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together. Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. dismantling them would be a blow against government that has become too big not to fail.”
In the meantime, on the other end of the political spectrum, Senator Elizabeth Warren used a Senate Banking Committee Hearing reviewing progress on Dodd-Frank implementation to admonish regulators that too big to fail banks were becoming too big to take to trial with the end result that they are not being properly regulated. She is quoted in the New York Times, saying “If they can break the law and drag in billions in profits, and then turn around and settle, paying out of those profits; then they don’t have much incentive to follow the law.” No, they don’t, but meanwhile, credit unions are put at a competitive disadvantage in complying with regulations they didn’t need in the first place.
For the last six years, the behemoth banks have played a very cynical game running to government for a bailout when their business practices blew up in their faces, but complaining that anyone seeking to regulate them is against the free market. At the end of the day, though, they should not be able to have it both ways. I say God Bless the guy that makes $25 million a year so long as he pays the price for messing up. That’s why we need true banking reform and why we might be getting a consensus from both the left and the right that now is the time to examine our financial system before it further disfigures our capitalist system.