Republicans Want to Repeal Resolution Authority
Mark Thoma points us to
the House Republicans on the Financial Services Committee just voted to repeal “resolution authority.”
Let’s review the history. When the crisis hit, the government bailed out many financial firms — shadow banks as they are known. That’s not what it does when an ordinary bank fails. When ordinary banks fail, the government takes over the bank, puts the good assets in one pile, the bad assets in another, then repackages the good assets into a new bank that is sold back to the private sector as soon as possible.
This has many advantages, including the ability to replace managers of failed firms instead of rewarding them with a bailout. So why wasn’t this approach adopted during the financial crisis? The Treasury argues that it did not have the legal authority to take over large shadow banks — these banks fell outside of the existing regulatory umbrella (there is dispute on this point, some people claim the government regulators could have twisted existing regulation to allow this, but government regulators insist otherwise). Thus, government regulators believed there were only two (bad) choices. Let too big to fail banks fail and suffer the economic consequences, or to bail them out, including bailing out the owners and managers who had led the banks to disaster. If it had resolution authority — the ability to step in take over when banks fail — the rewards to management could have been avoided, and taxpayers could have been better protected in other ways, but limits on legal authority gave regulators only two bad options. Do nothing, or bail the banks out.
The end of all government regulation is anarchy. Republicans, and all other Americans, have never lived within an anarchic state. They may come to find that under the banner of anarchy all forms of disrespect for authority rises to the surface. If the extreme right wing of our government, at present it would seem to include the entire Republican Party and some portion of their alternates, is ever successful in accomplishing their stated goal of reducing governemnt to a “drown it in the bathtub size” they may be disappointed in the alternative to too little government and we may end up with the Jacobin Solution. Typically the left is more disorganized, but still represents the interests of the vast majority far more so than does the right wing ideologoists who tend to favor the ownership class.
I wish people who know nothing about financial organaization resolution would stop talking about it as if they did. In the case of this writer, please name names–which banks or non-banks, which executives, which stockholders.Then you will dismiss your generalizations by your failure to be able to e specific.
Your generalizations will not stand up to scrutiny. But unless you name neams, we will have to write a megillah to explain why.
Thoma seems onlt to be describing a historical series of events and noting that the outcomes could have been better with more long lasting consequences. The specific names are a part of that historical record. Why would their reiteration here add anything to the conversation or to our understanding of the point Thoma is making? We know the events took place and we know who the participants had been other than the specific stock holders who it is not necessary to know.