The author is a former chief economist of the IMF and is now a professor at MIT. Chuck
By Simon Johnson, co-author of 13 Bankers (out in paperback on Monday)
Baseline Scenario, 9 January 2011
Highlighted extracts:
The Bill Daley Problem is completely bipartisan – it shows us the White House fails to understand that, at the heart of our economy, we have a huge time bomb.
…largest U.S. banks – have far too little equity and far too much debt relative to that thin level of equity…
Today’s most dangerous government sponsored enterprises are the largest six bank holding companies: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley.
No one can show significant social benefits from the increase in bank size, leverage, and overall riskiness over the past 15 years. The social costs of these banks – and their complete capture of the regulatory apparatus – are apparent in the worst recession and slowest recovery since the 1930s.
Paul Volcker gets it; no wonder he has resigned. Mervyn King, governor of the Bank of England, gets it. Tom Hoenig, president of the Kansas City Fed, gets it. Elizabeth Warren, the tireless champion of consumer rights, gets it. Gene Fama, father of the efficient financial markets view, gets it better than anyone.
This is not a left-right issue – again, look at the list of people who co-signed Professor Admati’s recent letter to the Financial Times. This is a question of technical competence. Do the people running the country – including both the executive branch and the legislature – understand economics and finance or not?
Top bankers, including Bill Daley, have pulled off a complete snow job – including since the crisis broke in fall 2008. They have put forward their special interests while claiming to represent the general interest.
Bill Daley now controls how information is presented to and decisions are made by the president. Daley’s former boss, Jamie Dimon, is the most dangerous banker in America – presumably he now gets even greater access to the Oval Office. Daley is on the record as opposing strong consumer protection for financial products;… [Emphasis added.]
Phi Beta Iota: Our generous and well-intentioned philanthropists appear to be unaware that the Federal Reserve, Morgan Chase, and Citi-Bank have pulled a Bernie Maddoff on them–they think they are being “taken care of” at the very moment when everything they have worked so hard for is most vulnerable to a massive melt-down. The control of the President's mind and time is the ultimate victory for anyone seeking to control the White House. It is “checkmate” against We the People. None of the bureaucracies in the Executive–and certainly not the so-called “intelligence community”– are capable of rescuing the President–he is a happy captive.
