Wednesday, January 09, 2013

Robert Reich whistling in hell

By Frank Moraes 

I really value optimistic people. But I don't pay much attention to them. Two of my favorite political writers are Dean Baker and Eric Alterman, or as I think of them, the Depressing Duo. Or "Pessimistic Pair" if you prefer. Alterman perpetually looks like his first girlfriend just dumped him. Baker has transcended that and is on to that period when you are sarcastic about everything. But I read them because (1) they are brilliant and (2) they are right to be depressed. But sometimes, rarely, an optimist is right. So you have to pay attention.

There is an old Far Side cartoon I remember. It takes place in hell. Everyone is working very hard. There are all miserable. Except for one guy. He is pushing an over-filled wheelbarrow and whistling a happy tune. Two demons overlook the scene and one says, "I don't think we're getting through to that guy." That's how I'm feeling about Robert Reich today.

He posted an article that seems pretty compelling even if it seems on the far side of Pollyanna, "TARP is Over, But the Bailouts Will Continue Until the Big Banks are Broken Up -- And Washington Knows It." He notes that the chairman of the House Financial Services Committee, Jeb Hensarling -- a Republican, of course -- wants to break up the banks. And so does the Dallas Fed. So he argues that all we need is one more big bank loss and we will get a better banking system.

He is right that we need to break up the big banks. Reich points out that the system is unfair to the small banks who have to pay more to borrow than the big banks. This is because of the estimated $60 billion per year that the big banks get via implicit insurance from the government because they are "too big to fail." As a result, there is a lot of power in all those little banks who would like at least a more level playing field.

So Reich is right to think that there may be some hope. But I find it hard to be too optimistic. As he points out, the five biggest banks control almost 44% of all bank deposits. This is up from 28% just ten years ago. These numbers indicate the need for reform. But they also indicate just how powerful these banks are. And once the country starts talking about all this stuff, these banks will start the full court press of their lobbying. Politicians like Hensarling will suddenly see that big banks are a good idea, and in 2023, the top five banks will control 75% of all banking.

But remember, "Oh, yes; the game was to just find something about everything to be glad about -- no matter what 'twas!"

(Cross-posted at Frankly Curious.)

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