Yesterday’s hearing at the Joint Economic Committee, convened by Congresswoman Maloney, gave me some hope that Congress might be thinking about taking some leadership in systematically restructuring our financial system. I highly recommend that everyone watch the video.
Sam Brownback, Republican Congressman Burgess, Democratic Congressman Cummings, Democratic Congresswoman Maloney–unlikely bedfellows, to say the least–all appeared to accept the arguments of Joseph Stiglitz, Simon Johnson, and Thomas Hoenig, that the current PPIP and TARP projects are not just foolish but dangerous, and that we need a radical restructuring of the response to the crisis.
The panel starts with discussions of economic failure, but ends with the problems of political failure. As Congressman Burgess said in the opening remarks, "Trillions of taxpayer dollars are at risk, but congressional approval is not needed for the plan to proceed …on its face this is a violation of the democratic process."
Stiglitz described how "the big banks … tried to shape the view that there is no alternative than throwing [them] massive amounts of money." But he–and Johnson–also talked about how the revolving door between wall street and government is a real problem because of mindset, not just greed. If someone has "grown up" in the culture of big banks, he said, "they see things in this very peculiar way … we’ve seen some outstanding examples of that" in this crisis. "We’ve seen all our regulators get captured," said Johnson.
The hearing is intelligent, thoughtful, and shows some signs of life in our most representative branch, suggesting that Congress–chaotic, strange, over-gerrymandered, but still set up to be responsive to popular sentiment–might actually take some leadership in reform.
Congresswoman Maloney, in particular, asked repeated questions not just about what should be done, but how–you could watch her thinking about how Congress could take leadership.
Notably, every single member of the panel advocated regulations that would lead to encouraging small and medium sized banks, a more diverse and truly competitive system. As Johnson said, we have to break up the banks–both for our economic future, and to constrain the chances for regulatory capture in the future.
A hearing is not action, and the actions to date have been trivial. But with pressure, we could see Congress taking responsibility for economic policy; as Elizabeth Warren said the other day, we need people involved for our policy to improve.