New Book by MIT Sloan Professor Warns of Next Financial Meltdown In 13 Bankers,
Simon Johnson calls for breakup of nation’s biggest banks..."
"Channeling
Thomas Jefferson and Theodore Roosevelt, MIT Sloan School of Management
Professor Simon Johnson warns in a book being released today that a “new
financial oligarchy” threatens not only the nation’s economy, but its political
core. In 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown
(Pantheon), Johnson, a professor of entrepreneurship and management, says the
book provides “the back story” for the 2008 financial crisis “and for all the
issues being raised now around financial reform. We hope the book helps people
have a badly needed conversation about what we must do to push back against
dangerous, narrow interest groups that now threaten our economic well-being.”
“That thought should frighten us into action.” In 13 Bankers, Johnson, a former chief economist for the International Monetary Fund, and co-author James Kwak cite historical precedents and offer financial analysis to conclude that a second financial shock is inevitable unless the financial and political stranglehold held on Washington by the nation’s biggest banks is broken. “The best defense against a massive financial crisis is a popular consensus that too big to fail is too big to exist,” the authors write. “This is at its heart a question of politics, not of economics or of regulatory technicalities.”
The book points out that the current concentration of financial and political power is not unlike other moments in American history. President Theodore Roosevelt, for example, challenged the monopoly powers of banker and industrialist J.P. Morgan. “No one thought he could win,” Johnson says in an interview, “but he did succeed in the first prosecution of a corporation under the Sherman Antitrust Act.” Roosevelt, he said, began a process that helped people understand the need to rein in the power of corporate giants, such as John D. Rockefeller’s Standard Oil, “which was arguably more important as a single company in 1910 than J.P. Morgan was then or J.P. Morgan Chase is now,” says Johnson.
Similar leadership is needed from the Obama administration and Congress now, according to 13 Bankers, which concludes that regulatory changes and other responses to date have been vastly inadequate. Johnson supports the administration’s proposed consumer protection measures, but overall, “You can’t just tweak a few rules and expect to rein in these big institutions.” Instead, the book calls for the six biggest banks to be broken up and for hard limits to be imposed so that banks cannot rebuild themselves into political and financial powerhouses. “Saying that we cannot break up our largest banks is saying that our economic futures depend on these six companies,” notes 13 Bankers. “That thought should frighten us into action.”
13
Bankers: The Wall Street Takeover and the Next Financial Meltdown
