The Conservative Case For Bank Break-Ups – The Dish
Andrew Sullivan
The Daily Beast

Reading Mr. Sullivan this morning, there appears to be a growing conservative groundswell behind the idea of breaking up America’s “too-big-to-fail” mega-banks, specifically BankAmerica Corporateion, JPMorgan Chase & Company, and Citigroup Inc. Not only does Sullivan like the idea, proposed by MIT professor Simon Johnson at Bloomberg, but also Erick Erickson from The Red State endorses it, as does Michael Brendan Dougherty at The American Conservative.

Where I part ways with these gents is that they are approaching this more as a campaign tactic than a matter of principle. And a matter of principle it is (or should be) for every Republican with a functioning cerebral cortex.

The case, as I see it, is this:

1. The mega-banks have become so large that they stifle competition in the marketplace. That’s monopolistic, and that’s not legal.

2. The mega-banks have become so large that they have the ability to manipulate policy. That’s anti-democratic.

3. The mega-banks have become so large that they operate above market forces. This explains why they can charge high fees and behave in a way that earns them preposterously low consumer satisfaction ratings.

Republicans are pro-business. This is not the kind of business I think most of us signed-up to get behind. The simple reason to break up these banks is to make them subject to market forces, customer demand, and the rule of law.

Surely we can all get behind that?

In a compelling read in The New Republic, editor John B. Judis notes in his responsa to the Occupy Wall Street crowd:

First, the primary focus should be on reviving American industry, which includes everything from machine tool factories to software producers and from auto companies to biotech labs. Doing that will entail modifying our arrangement with Asia. Making these kinds of changes can be difficult, but it has happened before—during Reagan’s second term and in the first two years of Clinton’s presidency, when the United States got tough with its trading partners and subsidized innovation and growth.

Despite the title, Judis’ point is not that we should ignore the need to re-regulate the financial sector, but that shackling the Wall Street beast alone will not be enough to return America to competitiveness.

Well said.

Preet Bharara (Photo credit: Wikipedia)

“The bigger and better question may not be whether insider trading is rampant but whether corporate corruption in general is rampant; whether ethical bankruptcy is on the rise; whether corrupt business models are becoming more common.”

– Preet Bharara, Deputy United States Attorney, Southern District of New York

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Americans’ Debt Cutting Hampers Growth – WSJ.com.

Jon Hilsenrath and Ruth Simon of the WSJ echo and fortify what David Brooks was saying in The New York Times last week: three years after the start of the global financial downturn, Americans are starting to liquidate their consumer debt, down 8.6% in over the past 38 months. Any fiscal conservative would take that as good news: the people of the United States have taken a small but important step toward becoming a nation of savers and investors again.

But for some reason, the article (starting with the headline) seems to take a negative view of the trend:

Consumers are starting to squeeze back. Wall Street is not happy. (Image by alancleaver_2000 via Flickr)

The national belt-tightening, known as deleveraging, comes as the U.S. economy struggles to fend off a double-dip recession. Paying off bills slows consumer spending on appliances, travel and a slew of other products and services. Home sales, the engine of past economic recoveries, remain depressed.

This is all true,  no doubt, and a lot of us are revisiting our Keynesian roots these days. But short-term pain is better than long-term pain. The sooner American consumers learn to live within their means and stop competing with enterprises for increasingly tight credit, the faster we can begin to rebuild an economy that need not rely on financial manias to drive prosperity.

What is more, it is still an exaggeration to say that Americans as a whole have rediscovered the virtue of thrift. Much of the “de-leveraging” is the result of credit default. It will take some time before we can really judge the extent to which behaviors have changed for the better, or whether Americans will return to their spendthrift ways just as soon as they think they can afford it.

Related articles

• American Consumers Have No Need For Any Stinking Deleveraging (blogs.wsj.com)
• Households Are Still Deleveraging. Or Not. (economistsview.typepad.com)
• Is Focusing on Deleveraging a Useless Distraction? (rortybomb.wordpress.com)
• Is a Deleveraging Consumer Spending Less ? (ritholtz.com)
• Steen’s Chronicle: Correction or deleverage of speculative overhang? (tradingfloor.com)
• It’s the Debt, Stupid (fool.com)