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
Roosevelt Fellow Saqib Bhatti talked with Bloomberg after the city of Chicago announced that it would need to pay at least $270 million to get out swap deals the city had entered. Meanwhile the city is facing a significant tax increase to cover a budget shortfall. We’re paying these fees at the same time the
Leading up to the first Democratic debate on October 13th, Roosevelt Fellow Mike Konczal talked with CBS News about the different proposals to increase taxes on Wall Street. On whether or not creating a tax on trades was a good idea, Konczal said: It’s only one piece of the puzzle, but an important piece. And done
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.
After Hillary Clinton released her financial reform agenda in early October, Roosevelt’s Mike Konczal compared her plan and Bernie Sanders’ plan against the “Elizabeth Warren test” for financial reform. The Elizabeth Warren test calls for five key pieces of financial reform: defending Dodd-Frank, increasing enforcement, reining in the shadow banking industry, a financial transaction tax, and breaking
I have a new piece at Boston Review, Hail to the Pencil Pusher: American Bureaucracy’s Long and Useful History. It’s a review of four recent legal histories about the long rise of the administrative state and its place in securing and expanding liberty. Many of these histories, while academic, address the arguments that have become
After the Federal Reserve decided not to raise interest rates in September, Roosevelt’s Mike Konczal joined the Economic Policy Institute’s Tom Palley and Bloomberg TV’s Alix Steel and Joe Weisenthal on “What’d You Miss?” to discuss what it could mean for wages across the US. Watch Will U.S. Wages Remain Under Pressure?
“How the rich devoured the American corporation — and what we can do about it,” The Week
"Why Big Corporations Would Rather Waste Billions Of Dollars Than Give It To Workers," Think Progress
“Why Big Corporations Would Rather Waste Billions Of Dollars Than Give It To Workers,” Think Progress