Jan 30 2016

Herr Doktor Professor- Part 1

As careful readers know I have frequently quoted Herr Doktor Professor, I’ve even given my reasons for doing so- it’s a flat out appeal to authority, doesn’t hurt to have a Nobel Prize winner make your arguments for you.

Oh, don’t act so offended. I only took the Economics necessary to support my History Major and I would have skipped those too if I’d been allowed, the irony is that I’m the resident economist. Life is strange.

I’m also a Political Scientist, or I was before I realized it was 99 and 44/100% pure Ivory crap with the extra .56% being agenda which I hope you’re hip to dear reader because lye and fat really only taste good with the rat droppings.

I’ve met him in person you know. He has the practiced skill (it doesn’t usually come naturally) to read your badge before he signs your book so he thinks I’m Roger Murdock-

But just remember, my name is ROGER MURDOCK. I’m an airline pilot.

I think you’re the greatest, but my dad says you don’t work hard enough on defense. And he says that lots of times, you don’t even run down court. And that you don’t really try… except during the playoffs.

The hell I don’t! LISTEN, KID! I’ve been hearing that crap ever since I was at UCLA. I’m out there busting my buns every night! Tell your old man to drag Walton and Lanier up and down the court for 48 minutes!

And I look just like him too; no, not Kareem, pretty hard to impersonate a 7 foot tall Basketball dude and I can barely do a layup let alone a skyhook or dunk; I mean Herr Doktor Professor but I think it’s because I have a silvery mane and a beard. You know, if you want to flatter me, why not compare me to George Clooney or Harrison Ford instead of some wonky nerd.

Normally when the Herr Doktor Professor screws up I remain silent which I’ve been doing a lot of recently as he becomes increasingly incoherent and unhinged in support of Hillary Clinton, but now he’s attacked our good friend dday (David Dayen), cowardly, not even by name.

I don’t do the twitter but as near as I can tell it started with this-

What the Liberal Attacks on Bernie Sanders Are Really About
By David Dayen, Fiscal Times
January 22, 2016

Self-styled liberal wonks and opinion writers decided to turn their guns on Bernie Sanders this week, deriding him as myopic, unrealistic and even wrong on the merits of his arguments on behalf of single-payer healthcare and systemic financial reform. But at least on financial reform, they weren’t actually attacking Bernie. They were attacking Elizabeth Warren.

It’s Warren, not Sanders, who represents the leftward pole in the intra-Democratic debate over how deeply to reform the financial sector. Warren, not Sanders, manifests part of her vision in the bill she wrote — the 21st Century Glass-Steagall Act, named for the two Depression-era lawmakers who initially separated commercial and investment banking. When Hillary Clinton and her supporters in the media dismiss Glass-Steagall as unnecessary and dangerous, they dismiss a consensus in most developed nations about the need to break interconnections in finance. The radicals in this debate, in other words, are those protecting the deregulatory status quo.

Here’s one such radical: Paul Krugman, who derided the restoration of Glass-Steagall as “nowhere near solving the real problems.” As many
commentators do, Krugman takes a detour into identifying whether the investment/commercial bank firewall caused the 2008 crisis, an irrelevant parlour game, unless you think the next financial crash will occur in precisely the same way. He is wedded to the idea that the rise of shadow banking — non-bank institutions performing bank-like activities outside the regulatory perimeter — represents the real threat.

This runs counter to the Financial Crisis Inquiry Commission’s report (.pdf) and a host of financial experts, all of whom list banks’ “too big to fail” status as a central factor. But beyond that, it’s clear to me that Krugman has never read the bill, Elizabeth Warren’s 21st Century Glass-Steagall Act, which he’s criticizing.

Here’s a one-page fact sheet (.pdf), and the relatively longer 30-page bill text (.pdf). The 21st Century Glass-Steagall Act restricts banks to a core set of activities: taking deposits, extending credit to individuals and businesses, processing payments, buying and selling “coin and bullion,” and investing in securities for customers — and only for customers, “in no case for its own account.”

Krugman argues, “pushing the big banks out of shadow banking… could make the problem worse by causing the risky stuff to ‘migrate elsewhere, often to places where there is less regulatory infrastructure.’”

This is precisely the opposite of what Krugman said in 2014, when he fought against the eventual repeal of Dodd-Frank’s “swaps push-out” provision, which separated derivatives trading desks into separately capitalized subsidiaries. Lobbyists at the Financial Services Forum argued explicitly (.pdf) that pushing out swaps would place them into less-regulated corners; Krugman disagreed. He said the government should “stop banks from taking big risks with depositors’ money.” When did he change his mind? And does he now disagree with Hillary Clinton, whose plan calls for the restoration of the swaps push-out measure?

Liberal reformers used to get this. In fact, Krugman and most of his backers pull from the work of Mike Konczal, who lately has led on the idea that Glass-Steagall restoration wouldn’t be a particularly effective goal. But back in 2010, when Dodd-Frank was being debated, Konczal co-wrote a chapter (.pdf) in a report for the Roosevelt Institute called “Creating a 21st Century Glass-Steagall.” He understood then that “the real problem of this crisis is in the overlap between investment banking and commercial banking.”

Konczal wanted mostly to extend regulatory strictures to shadow banks. But much of the thinking behind his solution in 2010 looks like Warren’s solution in 2016: preventing ordinary commercial banks from concentrating resources in the riskiest areas, and limiting shadow banks’ funding advantages. When you dig into Warren and Konczal’s seemingly disparate arguments, they come to a rough equilibrium: Let’s reduce risk by adding resiliency to the financial system. Everyone in the Democratic coalition concurs with this; the differences are a matter of degree.

But denying this consensus, and delegitimizing structural reform as silly and shortsighted, only does the work of banks and their lobbyists, who want to preserve the current system and cut off any avenues for a more far-reaching redesign.

Why in the world are people who call themselves liberals helping them do it? Those wondering why Warren hasn’t endorsed Hillary Clinton yet should consider whether it’s because Clinton and her minions are delivering a mortal wound to the cause of Warren’s life.

Konczal is an important name to remember because not only is he a straight out Hill Shill, but it is his honor Krugman professes to be defending.

1 comment

  1. ek hornbeck

    Vent Hole

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