My column in today’s Keys Weekly.
Q. What’s going on with financial reform in Congress?
A. As you have probably heard by now, there is a significant financial reform bill currently making its way through Congress. The House passed its proposed reform bill at the end of last year, and the Senate will take up its own version at the end of this month. Prepare for heavy spin.
As one Senator memorably said a year ago in the midst of the credit crisis, “The banks are still the most powerful lobby on Capitol Hill. And frankly, they own the place.” So I think it’s notable that some fairly serious reform efforts have survived thus far.
The reform of our financial system is an issue that should be bigger than politics. The massive bailouts of “too big to fail” Wall Street banks were deeply offensive to just about everyone, regardless of political beliefs. They demonstrated at a shocking level the unholy alliance that has grown between politics and finance over the last few decades. In what may be one of the great ironies of our time, it turned out that Wall Street banks were bad for free markets.
I think it’s also important to understand that Wall Street banks didn’t get to be so big because of their economic advantages – they got there because of subtle political ones. What also should be kept in mind, however, is that regulation can unequivocally make the risk in the system worse. And it doesn’t make any sense to leave financial reform up to the same regulators who just failed us all so miserably.
I think Teddy Roosevelt had it right. The big banks should be broken up – not because that alone will guarantee our financial system will be safer, but because it will end this dangerous mix of politics and finance that nearly led to the collapse of the most advanced economy in history. One year later, the surviving Wall Street banks that helped cause the crisis are even bigger and more powerful. And until we address “too big to fail,” we’re really just kicking the can down the road.