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Elizabeth Warren: ‘That’s the strongest argument for a modern Glass-Steagall’
Elizabeth Warren: ‘That’s the strongest argument for a modern Glass-Steagall’
Posted by Ezra Klein
Ezra Klein: So JP Morgan lost $2 billion. They’re not asking for a bailout. They’re not threatening to capsize either themselves or anyone else in the system. And so they say, and it’s not an entirely unfair question, why is this Elizabeth Warren’s business, or the U.S. Congress’s business? Isn’t making bad investment decisions legal?
Elizabeth Warren: That is what Jamie Dimon has said. He says it’s stupid and sloppy but we’ll fix it. So stay away. But what if the next loss is $20 billion or $200 billion? Is he saying JP Morgan should be entitled to continue to take these bets right up until the day it lands in the taxpayers lap again?
Banks are different than other kinds of companies. We learned that in 2008. They run the risk of bringing down our jobs, our pensions, our economy. The basic deal we made with them is they get to operate banks — the things that take savings and investments and checking accounts and get a federal guarantee — in return for submitting to substantial oversight to make sure their activities are safe.
<...>
EK: Do you support a modernized Glass-Steagall law?
EW: Yeah! I’ve talked with Sen. Maria Cantwell from Washington State. She’s been working on that, and I think the debate should be on the table.
EK: What about breaking up the big banks?
EW: You’re approaching risk from two different directions. One is the risk of the activity. That’s the Volcker rule. The other direction is to say risk is an assumption of size. Community banks shouldn’t have to deal with complex regulatory oversight, but the largest institutions should be subject to far more aggressive oversight and have to pay more for the protections they receive from the American taxpayer. Then shareholders may decide to invest in institutions that are not so large.
<...>
EK: Can Dodd-Frank work if it’s effectively implemented?
EW: I think Dodd-Frank is a strong bill that moves in the right direction. But the market keeps changing. The practices keep changing. The idea that we’ll pass one law and then declare that problem is solved, we’ll be back again in 50 years, just doesn’t work anymore. We had a double problem here: Both deregulation and the failure to adapt to new financial conditions and products and practices. That’s what permitted risk to multiply in the system until it nearly brought the economy to its knees.
http://www.washingtonpost.com/blogs/ezra-klein/post/elizabeth-warren-thats-the-strongest-argument-for-a-modern-glass-steagall/2012/05/14/gIQAfxTLPU_blog.html
Posted by Ezra Klein
Ezra Klein: So JP Morgan lost $2 billion. They’re not asking for a bailout. They’re not threatening to capsize either themselves or anyone else in the system. And so they say, and it’s not an entirely unfair question, why is this Elizabeth Warren’s business, or the U.S. Congress’s business? Isn’t making bad investment decisions legal?
Elizabeth Warren: That is what Jamie Dimon has said. He says it’s stupid and sloppy but we’ll fix it. So stay away. But what if the next loss is $20 billion or $200 billion? Is he saying JP Morgan should be entitled to continue to take these bets right up until the day it lands in the taxpayers lap again?
Banks are different than other kinds of companies. We learned that in 2008. They run the risk of bringing down our jobs, our pensions, our economy. The basic deal we made with them is they get to operate banks — the things that take savings and investments and checking accounts and get a federal guarantee — in return for submitting to substantial oversight to make sure their activities are safe.
<...>
EK: Do you support a modernized Glass-Steagall law?
EW: Yeah! I’ve talked with Sen. Maria Cantwell from Washington State. She’s been working on that, and I think the debate should be on the table.
EK: What about breaking up the big banks?
EW: You’re approaching risk from two different directions. One is the risk of the activity. That’s the Volcker rule. The other direction is to say risk is an assumption of size. Community banks shouldn’t have to deal with complex regulatory oversight, but the largest institutions should be subject to far more aggressive oversight and have to pay more for the protections they receive from the American taxpayer. Then shareholders may decide to invest in institutions that are not so large.
<...>
EK: Can Dodd-Frank work if it’s effectively implemented?
EW: I think Dodd-Frank is a strong bill that moves in the right direction. But the market keeps changing. The practices keep changing. The idea that we’ll pass one law and then declare that problem is solved, we’ll be back again in 50 years, just doesn’t work anymore. We had a double problem here: Both deregulation and the failure to adapt to new financial conditions and products and practices. That’s what permitted risk to multiply in the system until it nearly brought the economy to its knees.
http://www.washingtonpost.com/blogs/ezra-klein/post/elizabeth-warren-thats-the-strongest-argument-for-a-modern-glass-steagall/2012/05/14/gIQAfxTLPU_blog.html
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