With the fall semester underway at American University in Washington, D.C., students are starting new classes, making new friends, and joining new clubs. Most of these students will pay over $43,000 this year in tuition and fees, and collectively their payments will account for nearly four-fifths of the school’s operating budget. But a sizable portion
It’s impossible to look at any single financial regulation without understanding the problem it is trying to solve and how it would hang together with the rest of the financial regulatory regime. This is why cost-benefit analysis of financial rules isn’t very useful, as any rule depends on all the other rules. It also means
A healthy financial system is crucial to a stable and productive market economy. But after decades of deregulation, the U.S. financial system has turned into a highly speculative system that has failed spectacularly at doing its job. My new report, “Overcharged: The High Cost of High Finance,” written with Juan Montecino and published by the
In the last two decades, Wall Street banks have lured seven of the eight largest universities in Michigan into complex and risky financial deals. Through these deals, each school continues to pay millions to banks in fees while students throughout the state watch their tuition bills rise. City workers have suffered the effects of predatory
In an unprecedented move yesterday, the Chicago City Council rebuked Mayor Rahm Emanuel’s plan to voluntarily pay banks $106 million in penalties to terminate the city’s remaining interest rate swap agreements. In another unprecedented move, I attempted to explain to my mother what had happened. I told her, in a mix of English and our
Corporate short-termism—also known as “quarterly capitalism”—has become a key issue in the 2016 election. It’s also one of the major economic trends that has been increasing inequality and weakening economic growth for the last 35 years. So what is it, how has it transformed American business, and what can we do about it? In our Agenda
The discussion over a Too Big To Fail (TBTF) subsidy, where the largest banks are able to borrow more cheaply as the result of potential future bailouts, is back in the discussion. Paul Krugman referenced it with a link to my review of two studies arguing the subsidy has largely declined since the crisis. Dean Baker has responded with critical thoughts on the studies.
My point isn’t to say that the subsidy is completely over. Nor, as I’ll explain in a bit, is it to say that TBTF is over. Instead, understanding this decline lets us know we should push forward with what we are doing. It debunks conservative narratives about Dodd-Frank being fundamentally a protective permanent bailout for the largest firms that we should scrap, and provides evidence against repealing it. And ideally it gets us to understand this subsidy as just one part of the more general TBTF problem that needs to be solved.
I’ll first respond to Dean Baker. Then I’ll map out four different ways of understanding what we mean by a TBTF subsidy, and what is and isn’t fixed, because that might clarify other responses I’ve been getting.
A remarkable thing happened: one of the largest banks slimmed down just a bit because of Dodd-Frank’s capital requirements. It’s another piece of evidence that the core parts are working, and if scaled up could make a dramatic structural change in the financial system. In July, the Federal Reserve finalized its rule on the special
Glass-Steagall (GS) has become a central part of the debate over financial reform in the 2016 election. Several commentators have portrayed it as a central objective of financial reform, verging on a litmus test for those who are serious about the topic. My opinion is that reinstating GS isn’t an important goal for financial reform.
The Republican presidential candidates will have their first televised debate of the 2016 cycle tonight. Here’s what they’re likely to say about the economy: 1. Cutting taxes on big corporations and top earners is the best way to grow the economy. All the candidates on stage tonight at the GOP primary debate will express some