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Home Publications Blogs Beat the Press "The U.S. Needs TBTF Banks," Because Larry Summers Says it, Doesn't Mean it's True

"The U.S. Needs TBTF Banks," Because Larry Summers Says it, Doesn't Mean it's True

Tuesday, 27 April 2010 04:54

The Post has a piece this morning on Delaware Senator Ted Kaufman and his proposal for breaking up the big banks. At one point it presents a quote from Larry Summers, the head of President Obama's National Economic Council: "Most observers who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to try to serve large companies, and hurt the competitiveness of the United States."

It would have been worth pointing out to readers that Summers' asssertion is not obviously true. Many prominent experts on banking, including two current regional Federal Reserve Bank presidents and Simon Johnson, the former chief economist at the IMF, have argued that the country does not need banks that are as large as the too big to fail institutions that would be broken up under Senator Kaufman's amendment.

Comments (8)Add Comment
written by izzatzo, April 27, 2010 6:55
Economies of scale and scope,
Pitched by Summers dopes,
Say monopolies are necessary,
To compete against each other,
On an international scale,
So domestic they can't fail.

Listen up banking brothers,
We've had enough of this,
Wreck the economy more,
On your graves we'll piss,
You're too big to exist.
written by Ron Alley, April 27, 2010 8:59
How can Summers' comments come as a surprise to anyone?

If not the architect of the financial deregulation that gave rise to the past two financial crises, Summers was surely a well-placed champion. He continues to champion policies that are likely to result in Financial Crisis- Chapter 3. Summers remains well-connected and enjoys a powerful role in the current administration. Too bad for Obama.
written by Queen of Sheba, April 27, 2010 10:59
It is remarkable that such a seemingly intelligent man as President Obama should continue to rely on such a short-sighted group of economic advisors who can't - or won't - see past the status quo. Even though he sponsors luncheons to which he invites economists with other viewpoints, he ignores their perspectives as soon as they leave the White House and continues to be enthralled by the pronouncements of the very people who aided and abetted this Great Recession. Remarkable indeed.
written by hoss, April 27, 2010 11:10
Let the banks be as large as they wish and let them do as they please. But instead of doing it with our Federally guaranteed currency, let them use their own scrip. Every synthetic product they offer should be denominated in their own scrip, the value of which would float on the world currency exchange like any other.

Preposterous? Sure, but it would create accountability in both the banks and buyers.
National reviw spam against obamacare
written by John Emerson, April 27, 2010 12:24
Off topic, but an idiot I know sent me this. It's all over the internet. I presume it's all lies, but it's been very efficiently boradcast.

written by David, April 27, 2010 3:52
Which points up why Mr. Summers is tool of the financial industry.
We're Making Progress, I guess
written by leo, April 27, 2010 11:09
So Summers et al. are actually being asked about Glass-Steagall by the media finally. I guess that's progress.

Of course, their response is that while Glass-Steagall made sense in the 1930's, we're far too advanced for such limitations nowadays -- which kind of sounds like the rhetoric that got rid of most of these regulations in the first place.
When private interests are considered paramount,
written by Scott ffolliott, April 28, 2010 1:11
When private interests are considered paramount, harm can only come to the public good. " The idea is essentially repulsive, of a society held together only by the relations and feelings arising out of pecuniary interest" - John Stuart Mill

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.