The Bill Daley Problem from Simon Johnsn

January 9, 2011 § Leave a comment

Top bankers, including Bill Daley, have pulled off a complete snow job – including since the crisis broke in fall 2008.  They have put forward their special interests while claiming to represent the general interest.  Business and other groups, of course, do this all the time.  But the difference here is the scale of the too big to subsidy – measured in terms of its likely future impact on our citizenship and our fiscal solvency, this will be devastating.

Most smart people in the nonfinancial world understand that the big banks have become profoundly damaging to the rest of the private sector.  The idea that the president needed to bring a top banker into his inner circle in order to build bridges with business is beyond ludicrous. 

Bill Daley now controls how information is presented to and decisions are made by the president.  Daley’s former boss, Jamie Dimon, is the most dangerous banker in America – presumably he now gets even greater access to the Oval Office.  Daley is on the record as opposing strong consumer protection for financial products; Elizabeth Warren faces an even steeper uphill battle.  Important regulatory appointments, such as the succession to Sheila Bair at the FDIC, are less likely to go to sensible people.  And in all our interactions with other countries, for example around the G20 but also on a bilateral basis, we will pursue the resolutely pro-big finance views of the second Clinton administration.

Top executives at big U.S. banks want to be left alone during relatively good times – allowed to take whatever excessive risks they want, to juice their return on equity through massive leverage, to thus boost their pay and enhance their status around the world.  But at a moment of severe financial crisis, they also want someone in the White House who will whisper at just the right moment: “Mr. President, if you let this bank fail, it will trigger a worldwide financial panic and another Great Depression.  This will be worse than what happened after Lehman Brothers failed.”

Let’s be honest.  With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout.  The risk inherent to our financial system is now higher than it was in the early/mid-2000s.  We are set up for another illusory financial expansion and another debilitating crisis. 

Very persuasive. I hope Daley will be a tough negotiator for the president, not for the banks. But looks like the fix is in.

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You are currently reading The Bill Daley Problem from Simon Johnsn at Reflections on GardenWorld Politics Douglass Carmichael.

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