6/30/2023 0 Comments Economix 4![]() Would allow the government to take big banks into a form of bankruptcy or liquidation.īut this notion of a resolution authority that can handle massive banks is a complete unicorn,Ī mythical beast with magical powers that does not really exist. We like to think we live in a more professional and technocratic age than a century ago, so the central pretense of current reform efforts is that we can design a “resolution authority” of some kind that Even the Federal Reserve, which has fallen on hard and embarrassing times since it was captured by Bigįinance during the 1990s, now has its leading officials give speeches to this effect. Rather it was the latest, and scariest, in a series of regular globalĪt the heart of this pattern of behavior is a perception of invincibility among the folks who run our biggest banks - and following our most recent crisis they act more assured than ever that the government willĪt the same time, everyone agrees that such “too big to fail” arrangements cannot continue. What hit us in 2008-9 was not a “once per century” event. Summers (in his 2000 Ely Lecture) Īnd JPMorgan Chase’s chief executive, Jamie Dimon - concede that big crises occur every five years or so. The White House economic adviser, Lawrence H. Upside for bankers and, when things go badly, massive downside for the rest of us.Įven the supporters of our existing financial structure - men like former Treasury Secretary Henry M. Rather it’s the ability of major banks to generate the conditions that make major international financial crises possible - with the incentive to take risks that, when things go well, result in huge We no longer fear individuals it’s the organizations they run that can make us or break us.Īnd, strangely, it is not the power of big finance to control everything that has us worried - except maybe in some movies. Rockefeller’s son was not lost on anyone.Ī hundred years later, we have come full circle, as the mainstream consensus again weighs what to do with today’s overly powerful banks. The fact that Nelson Aldrich’s daughter was married to John D. The Federal Reserve, while far from perfect, was created with far greater public control and more safeguards than ![]() Senator Nelson Aldrich’s push to create a central bank after 1907 - toīe underwritten by the government but controlled by big banks - ultimately backfired. Including farmers, small businesses and everyone else. ![]() Third, there was a blatant attempt to use the political power of big banks to shape the financial playing field in ways that would help them (and their close allies) and hurt the remainder of the private sector. His grip on corporations throughout the land was, by 1910, widely considered excessive. But when he put together Northern Securities - a vast railroad monopoly - he became a menace to public welfare, and more generally Morgan was without doubt the greatest financier of his day. Second, even well-run businesses became immensely powerful politically as they grew. ![]()
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