Why doesn’t Republican presidential contender Mitt Romney’s free-market gospel include a ringing call to break up the too big to fail banks?
Over at the conservative American Enterprise Institute blog, James Pethokoukis suggests Romney could benefit if he did just that.
After all, this is no longer a position favored only by Occupy Wall Street.
All kinds of establishment figures now acknowledge that breaking up the big banks is needed to heal our financial system, and that as long as we don’t, taxpayers could be on the hook for another bailout.
The most recent public official to reach this conclusion is none other than Richard Fisher, the president of the Dallas branch of the Federal Reserve, who last week issued a report in which he concluded: “The too big to fail institutions that amplified and prolonged the recent financial crisis remain a hindrance to full economic recovery and to the very ideal of American capitalism.”
This should be catnip for Romney, who professes to be all about ending government interference in the free market.
What the Dallas Fed’s report makes clear is that the Dodd-Frank financial reform legislation and the policies of the Obama administration haven’t lessened the power of the too big to fail banks, or made them healthier – it’s helped them gain market share while doing little to force them to reduce the same risky business practices that led to the 2008 financial collapse.
While Dodd-Frank theoretically sets up a process to deal with too big to fail institutions when they get in trouble, our politicians and regulators by their actions have signaled to the big banks that they don’t have the guts to break them up or get them to change how they do business.
For a politician in Romney’s position, staking out a position against the big banks would give him the high ground against the president, who claims to be reining in the banks’ bad behavior but isn’t.
It would help him with the Tea Party activists, who rail against the bank bailouts and crony capitalism. Promising tough action on the banks would also help him with independents who understandably don’t trust all the political double-talk they hear.
But Romney doesn’t have the guts to do it. His free market rhetoric stops right at the bankers’ door, where he must appear meekly with hat in hand, asking for donations, just like the president of the United States, from bankers who continue to prosper only because of the trillions of dollars worth of favors done for them by politicians using taxpayers’ money.
The top 5 donors to Romney’s campaign are people associated with bailed out banks, according to the Center For Responsive Politics. The president raised an unprecedented $15.8 million from the financial sector in 2008, while his administration was in the midst of bailing them out. Though Romney has the edge in Wall Street fundraising now, the president has vowed to fight back – including a pledge not to demonize Wall Street.
The big media and the politicians all talk about these policies as though they’re great intellectual debates about clashing views of the role of government. But when it comes to the too big to fail banks, all Romney’s free market preaching is just so much hot air.
This is the dishonest heart of our politics. What neither Romney nor the president, nor apparently the American Enterprise Institute, can acknowledge is that it’s all about the money.