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Economy
In reply to the discussion: Weekend Economists and the Accidental President December 13-15, 2013 [View all]Demeter
(85,373 posts)37. Soothing Words on ‘Too Big to Fail,’ but With Little Meaning
http://dealbook.nytimes.com/2013/12/11/soothing-words-on-too-big-to-fail-but-with-little-meaning/?hp&_r=1
Treasury Secretary Jacob J. Lew said Dodd-Frank ended too big to fail as a matter of law. This summer, President Obamas new Treasury secretary, Jacob J. Lew, offered a financial reform litmus test: By the end of 2013, could we say with a straight face that we have solved the too big to fail problem? Last week, Mr. Lew gave a sweeping overview of the efforts to overhaul financial regulation. It was the talk of a man who has been practicing his straight face in the mirror.
To judge by his performance, one technique for remaining stone-faced is to recite platitudes. Mr. Lew told the attendees: Going forward, we cannot be afraid to ask tough questions, with an open mind and without preconceived judgments. That requires that we must remain vigilant as emerging threats appear on the horizon. He reassured us that we have made tough choices, and very significant progress toward reforming our financial system.
This is not the stuff of persuasion. Simply asserting that the financial system becomes safer as regulators complete Dodd-Frank rules does not make it so. To those who dont think those rules go far enough, the administration offers little. More important, the claim frames the issue in a discouragingly limited fashion.
In his speech, Mr. Lew claimed that his test had been passed. He said, more than once, that Dodd-Frank ended too big to fail as a matter of law. That may sound soothing, but it is empty of meaning. Too big to fail was never literally the law of the land. Therefore, it wasnt something that Dodd-Frank excised. As long as there are gargantuan banks, Mr. Lew is left to make a faith-based argument that we can assume officials pre-battle boasts of courage will hold true as the fight is engaged. Too big to fail is a generally held assumption that some entities are so central and vital to our markets that they will be backstopped by the government. For starters, it requires expecting that government officials will have the stomach to unwind a failing bank with a multitrillion-dollar balance sheet and impose losses on shareholders and, if required, bondholders and other creditors...
LIKE THE WHOLE REST OF THE WORLD...MORE DETAIL AT LINK
Treasury Secretary Jacob J. Lew said Dodd-Frank ended too big to fail as a matter of law. This summer, President Obamas new Treasury secretary, Jacob J. Lew, offered a financial reform litmus test: By the end of 2013, could we say with a straight face that we have solved the too big to fail problem? Last week, Mr. Lew gave a sweeping overview of the efforts to overhaul financial regulation. It was the talk of a man who has been practicing his straight face in the mirror.
To judge by his performance, one technique for remaining stone-faced is to recite platitudes. Mr. Lew told the attendees: Going forward, we cannot be afraid to ask tough questions, with an open mind and without preconceived judgments. That requires that we must remain vigilant as emerging threats appear on the horizon. He reassured us that we have made tough choices, and very significant progress toward reforming our financial system.
This is not the stuff of persuasion. Simply asserting that the financial system becomes safer as regulators complete Dodd-Frank rules does not make it so. To those who dont think those rules go far enough, the administration offers little. More important, the claim frames the issue in a discouragingly limited fashion.
In his speech, Mr. Lew claimed that his test had been passed. He said, more than once, that Dodd-Frank ended too big to fail as a matter of law. That may sound soothing, but it is empty of meaning. Too big to fail was never literally the law of the land. Therefore, it wasnt something that Dodd-Frank excised. As long as there are gargantuan banks, Mr. Lew is left to make a faith-based argument that we can assume officials pre-battle boasts of courage will hold true as the fight is engaged. Too big to fail is a generally held assumption that some entities are so central and vital to our markets that they will be backstopped by the government. For starters, it requires expecting that government officials will have the stomach to unwind a failing bank with a multitrillion-dollar balance sheet and impose losses on shareholders and, if required, bondholders and other creditors...
LIKE THE WHOLE REST OF THE WORLD...MORE DETAIL AT LINK
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