Law Profs Letter Supporting SAFE Banking Act

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5 Responses

  1. Classic response from the left – beat up on players like JP Morgan and continue to write a blank check for Fannie and Freddie.

    sorry, but I simply cannot conceive that a move this drastic is at all well thought out and fully vetted…well except to the extent that this would also be a jobs bill for lawyers.

    Full disclosure: I own shares of JPM but I’ve never even thought of buying into Fannie/Freddie.

  2. Frank Pasquale says:

    Conservatarian–there is a strong conservative/libertarian case to be made for breaking up the banks. See, for instance, this article by Arnold Kling:

    “Big banks are bad for free markets. Far from being engines of free enterprise, they are conducive to what might be called “crony capitalism,” “corporatism,” or, in Jonah Goldberg’s provocative phrase, “liberal fascism.””

    And check out some of the blurbs for “13 Bankers”–Sen. Bunning, Niall Ferguson, and other conservatives have found Johnson & Kwak’s work compelling.

    This issue scrambles conventional political alliances.

  3. Aacan says:

    I read your response with interest….derisively but at least I took the time to read it. Because of the sheer brilliance of the response…it had to be brilliant because I could not grasp the link between bank reform as suggested and Freddie Mac/Fannie Mae…naturally I needed to learn more about the responder. In clicking the “View my complete profile link” on your blogger site I got nothing. Does this represent who you really are? Are you so proud of your credentials that you choose not to post them because it could impact the confidence of this esteemed group of economists?

  4. Aacan says:

    My earlier message is intended for the Maryland Conservatarian, whatever conservatarian means.

  5. Professor – I’ve read Kling’s article (no surprise that I subscribe to NR) and certainly have no inherent love for big banks; there is a guilty pleasure of sorts of watching Obama bite the Goldman hand that (significantly) fed him. However, as even Kling’s article refers to, the biggest outlays have gone for Fannie , Freddie, AIG and the auto companies. The size of JP Morgan is not the problem. Further, the present size of some of these banks is at least partially related to acquisitions done at the feds request – JPM taking on Bears and BofA taking on Merril. And then there is the technical matter of actually valuing the bank assets. Would this create the perverse incentive to understate assets? Sorry, I continue to believe that linking the size of a bank to overall GDP is not something we should rush into.

    And even assume retroactive application of SAFE Bank to 2008…and I think we still have the Lehman mess.

    As to “crony capitalism”, again who’s to argue? But this will always be a problem as long as government is such a significant player in the economy – as a tax, spend and regulatory force. A poster corporation for this is GE and their incessant pushing of “alternative” fuel credits and subsidies. I will gladly link arms to fight such unnatural couplings.