« Fed Watch: Monetary Policy on Autopilot | Main | Sustainable Fiscal Policy »

Monday, May 02, 2011

Paul Krugman: Springtime for Bankers

Republicans are trying to undermine financial reform:

Springtime for Bankers, by Paul Krugman, Commentary, NY Times: Last year the G.O.P. pulled off two spectacular examples of bait-and-switch campaigning. Medicare, where the same people who screamed about death panels are now trying to dismantle the whole program, was the most obvious. But the same thing happened with regard to financial reform.
As you may recall, Republicans ran hard against bank bailouts. Among other things, they managed to convince a plurality of voters that the deeply unpopular bailout legislation proposed and passed by the Bush administration was enacted on President Obama’s watch.
And now they’re doing everything they can to ensure that there will be even bigger bailouts in years to come. ...
Last year Congressional Democrats enacted a financial reform bill that ... extended regulation in a number of ways: consumer protection, higher capital standards..., greater transparency for complex financial instruments. And it created new powers — “resolution authority” — to help officials drive a harder bargain in future crises.
There are many criticisms one can make of this legislation, which is arguably much too weak. And the Obama administration has frustrated many people with its too-lenient attitude toward Wall Street...
But Republicans are trying to undermine the whole thing.
Back in February G.O.P. legislators admitted frankly that they were trying to cripple financial reform by cutting off funding. And the recent House budget proposal, which calls for privatizing and voucherizing Medicare, also calls for eliminating resolution authority, in effect setting things up so that the bankers will get as good a deal in the next crisis as they got in 2008. ...
And one more thing: by standing in the way of regulations that would limit future financial crises, Republicans are giving further evidence that they don’t really care about budget deficits.
For our current deficit is overwhelmingly the result of the 2008 financial crisis, which devastated revenue and increased the cost of programs like unemployment insurance. And while we managed to avoid large direct bailout costs (a fact not appreciated in public debate), we might not be lucky next time.
More and bigger crises; more and bigger bailouts; more and bigger deficits. If you like that prospect, you should love what the G.O.P. is doing to financial reform.

    Posted by on Monday, May 2, 2011 at 02:43 AM in Economics, Financial System, Politics, Regulation | Permalink  Comments (24)


    Feed You can follow this conversation by subscribing to the comment feed for this post.