The Importance of Elizabeth Warren: One of the most important results on Tuesday was the election of Elizabeth Warren as United States senator from Massachusetts. ... Hopefully, Ms. Warren will get a seat on the Senate Banking Committee, where at least one Democratic slot is open.
President Obama should now listen to her advice. ... If President Obama wants to have impact with his second term, he needs to stand up to the too-big-to-fail banks on Wall Street.
The consensus among policy makers has shifted since 2010, becoming much more concerned about the dangers posed by global megabanks. ...
Senator Warren is well placed, not just to play a role in strengthening Congressional oversight but also in terms of helping her colleagues think through what we really need to make our financial system more stable.
We need a new approach to regulation more generally – and not just for banking. We should aim to simplify and to make matters more transparent, exactly along Senator Warren’s general lines.
We should confront excessive market power, irrespective of the form that it takes. We need a new trust-busting moment. And this requires elected officials willing and able to stand up to concentrated and powerful corporate interests. ...
I'm glad to see Simon Johnson at least hinting that this criticism goes beyond just banks. Growing economic power is not limited to the financial sector, and attempts to "stand up to concentrated and powerful corporate interests" must be broadened beyond "too big to fail" financial institutions:
The economics of enormity, The Economist: How big is too big? America's firms are growing in size and while there have been huge firms stretching back to Standard Oil the fact that so many firms are so big is a new phenomenon. This week's Free exchange print article—Land of the corporate giants—takes a look at the implications of the megafirm era. As many of the names towards the top of the list (Exon Mobil, ConocoPhillips) suggest, lots of the growth at the very top is due to mergers. In some cases this is a good thing because bigger firms can be more efficient when they exploit economies of scale. But evidence suggests that scale economies are starting to wear thin. That's a concern given that many mergers are justified on the basis of cost efficiencies (see Waddling forward, also in this week's newspaper, for example). Even more worryingly, other studies suggest that some companies are bulking up for entirely the wrong reasons. Bigger isn’t always better. Read the article here.
Monopoly power distorts both economic activity -- you pay more, and less is produced -- and the distribution of income. And if you are big enough, it also gives you political power and influence. We should do more, much more, to eliminate excessive economic power.