Reading Dan Gross’s new book, Better, Stronger, Faster, was a strange experience for me. Gross’s account of America’s recovery from the worst financial crisis 80 years is relentlessly upbeat (not to mention terrifically engaging—the guy’s prose really moves). Having written my own, decidedly less sanguine, book, I was curious to see the evidence Gross used to justify his optimism. But it turns out his data points mostly overlap with mine: We have similar takes on the effectiveness of the government’s response to the crisis and the recession that followed.
Just wanted to follow-up on yesterday’s Jack Lew post to clarify the point I was making: One common reaction to the Lew announcement, voiced by liberals like Salon’s Glenn Greenwald, is to groan that Obama has just replaced one former banker (Bill Daley) with another, as Lew spent two years at Citigroup before joining the administration in late 2008. My feeling about this is twofold: First, liberals aren’t wrong to groan.
On Monday, a single, ringing court decision gave hope that Wall Street will finally be held to account for its role in causing the financial crisis. Federal District Court Judge Jed Rakoff’s opinion may soon force the SEC, the federal government’s investment regulator, to take big banks to court, rather than continuing to come to terms with them in out-of-court settlements.
If you want to read a radical critique of twenty-first century American capitalism, skip the Daily Worker and go straight to Wall Street. A 2005 report by three Citigroup analysts coined the term “plutonomy” to describe an economy in which only the rich matter.
There were many factors that led us to the financial crisis of 2008—dangerous derivatives, irresponsible ratings agencies, negligent regulators—but one was more important than the rest. We now know it as the “too big to fail” problem. What brought the economy to the edge of disaster wasn’t only that financial institutions had made rash bets on lousy investments, but that those institutions were so massive that when their bets went bad, they threatened to take the rest of the economy down with them.
The early frontrunner to succeed Larry Summers at the National Economic Council is Anne Mulcahy, according to various reports. Don’t feel bad if you’re wondering who she is or what her appointment would mean—while the former CEO of Xerox is well-known in the business community, there’s not much to tell about her life in politics.
[Guest post by Noam Scheiber:] Felix Salmon is chiding me for an "unconvincing" critique of Sebastian Mallaby's recent book on hedge funds, More Money Than God. He says shifting risk from banks to hedge funds would in fact make the system safe for failure: Scheiber is worried that people like Morgan Stanley’s Howie Hubler — who lost $9 billion at what was essentially an in-house hedge fund — will simply now repeat their failures at standalone funds, if banks are barred from taking those kind of bets. But that misses the point.
If President Obama appoints Elizabeth Warren to run the Bureau of Consumer Financial Protection, at least some parts of the financial industry are likely to fight her nomination. But which ones? One way to answer that question is to go through the 2005 book, All Your Worth, she co-wrote with her daughter. It’s a financial advice book, but it also singles out three groups for particular scorn. And it’s not hard to imagine those groups would be among those most opposed to her nomination. Here they are: 1. Credit Card Companies: Warren advised her readers to stay away from credit cards.
Louis D. Brandeis: A Life By Melvin I. Urofsky (Pantheon, 955 pp., $40) I. In 1916, Herbert Croly, the founder and editor of The New Republic, wrote to Willard Straight, the owner of the magazine, about the Supreme Court nomination of Louis Brandeis. Croly enclosed a draft editorial called “The Motive of Class Consciousness,” and also a chart prepared by a lawyer in Brandeis’s office showing the overlapping financial interests, social and business connections, and directorships of fifty-two prominent Bostonians who had signed a petition opposing Brandeis’s nomination.