I’d be a bit surprised to see Neil Barofsky grace the airwaves of CNBC again. Clearly the empty suits over there don’t appreciate someone who doesn’t immediately defer to the Masters of the Universe. You simply cannot make the simple case that TARP had a specific goal to increase lending and help homeowners that went unfulfilled without bluster and anger and obfuscation. The CNBC bots could not understand that simple point, which Barofsky made over and over again. They look at the figures provided to them by the banks and the government and make the determination that “TARP worked.” But that’s an unnecessarily narrow view of the program. The program had more metrics than simply “make money for the banks and stop financial collapse.” And it never followed through on any of those steps.
Incidentally, there’s no chance that any of these people read Barofsky’s book. The tell is when the one guy cites “the subtitle of your book,” which I assume is as far as he got.
But I have good news for CNBC. I have another exciting guest opportunity for them. They can hit up one William B. Harrison, Jr., a former chief executive of JPMorgan Chase, who writes today that the big banks should not be broken up.
Banks aren’t always popular even in the best of times, but the anger of recent years is unprecedented. The anger, while understandable, has fueled the misguided idea that we should break up the nation’s largest banks.
The argument is simple and sound-bite ready: In the years before the crisis, greedy bankers used their political muscle to grow from small, specialized banks into giant, all-purpose financial institutions. This transformation led to the financial crisis because banks became too big to manage and too big to fail. If we break them back up, we will eliminate the risk of future crises.
The problem is that every part of this argument is based on a fallacy.
It’s good to see the New York Times devoting some of their space in defense of those poor, downtrodden mega-banks who otherwise just can’t get a fair shake in this country. Thank you William B. Harrison, Jr., for providing voice for the voiceless.
Let’s go through what Harrison considers “fallacies.” One, he writes that consolidation in the banking sector was simply a natural development. Well, in the absence of regulators mindful of the inherent risks involved in creating too big to fail banks, yes! Harrison claims that this generates “greater efficiency in banking,” but the Bank of England and others have run the numbers and found that efficiency and economies of scale cease to have an effect beyond about the $300 billion range, well short of where our biggest banks are today.
Then, Harrison claims that big banks aren’t responsible for the financial crisis because none of the institutions that failed were big banks. He neglects to note that all of them failed from the collapse of the housing bubble and the growth of the derivatives sector, all funded and goosed by the big banks.
Finally, Harrison claims that big financial institutions are not too big to manage. He says this as an alumni of JPMorgan Chase, which recently lost as much as $7 billion on a single trade from their Chief Investment Office in London. And I haven’t even gotten into the complete wreck banks made of their mortgage securitization and mortgage servicing arms, which led to the breaking of the largest market in the world, the US residential housing market.
I also love how Harrison responds to the charge that banks have outsized influence on the political process with the simple phrase “this is just false,” with no evidence to back that up.
The New York Times really embarrasses themselves by publishing this apologia to the banks. But at least it gets someone else on the Rolodex of the producers over at CNBC.




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About FDL News Desk
Totally
Spot
On.
Thank you. (And Thanks to Mr Neal Barofsky as well.)
Surprising Barofsky got any airtime, let alone on CNBC. Not surprising is the “liberal” NYT whoring for the big banks. They don’t trust the WSJ to do the job alone.
From 1997:
http://www.chomsky.info/articles/199710–.htm
Now, the control grid is ever more exposed. Crises have always proved helpful in furtherance of social control, however.
It is interesting Barofsky was booked when that little quisling andrew ross sorkin was out of direct embarrassment range.
I see this in a slightly different light. The TBTF banks seem to be worried about the next crisis and are beginning a preemtive media campaign to counter talk of nationalizing and breaking them up.
Gar Alperowitz makes a good case, quoting conservative economists at the University of Chicago, that breaking up the big banks wouldn’t work and that the only viable alternative is to nationalize them.
Bank consolidation is natural? No, a river with which humans have not tampered, as by building a dam, is natural. A bear born in the wild is natural. So is a whale. However, nothing about a bank is natural, let alone bank consolidation’s being natural.
Banks consolidated because those who own and/or manage banks thought consolidation would bring more profits aka greed. Turns out, consolidation also brought greater risks.
As far as banks not failing, that is simply not so. Almost all failed, in the sense of failing to do what they should have. As far as bankruptcy, the American taxpayer bailed them out.
But, plenty of banks did fail 200-09. And it was because of their own greed. “Liar loans’ was a smokescreen.
The more I listen to Barofsky, the more impressed I get.
That CNBC was difficult to watch. It was like subjecting myself to Ministry of Truth agitprop for 11 mins.
You just have to laugh at these assbags at CNBC. Yeah right putting conditions of lending on banks after giving them billions is soooo antithetical to our sacred capitalist system, but the government giving them billions is the way capitalism is suppose to work.
NYT = class partisan rag, full of propaganda. Has been for quite a while.
I sincerely doubt that’s actually possible now.
Thanks for the foresight.
Amen.
If the government is infested with crooks, what then?
With these types, “natural” is a tell that what follows is a con.