George Will thinks its a good idea for free-market conservatives to support breaking up the banks. In the process he notes the plan comes from from liberal Senator Sherrod Brown of Ohio.
There is no convincing consensus about a correlation between a bank’s size and supposed efficiencies of scale, and any efficiencies must be weighed against management inefficiencies associated with complexity and opacity. Thirty or so years ago, [Ohio Sen. Sherrod Brown (D)] says, seven of the world’s 10 largest banks were Japanese, which was not an advantage sufficient to prevent Japan’s descent into prolonged stagnation. And he says that when Standard Oil was broken up in 1911, the parts of it became, cumulatively, more valuable than the unified corporation had been.
Brown is fond of the maxim that “banking should be boring.” He suspects that within the organizational sprawl of the biggest banks, there is too much excitement. Clever people with the high spirits and adrenaline addictions of fighter pilots continue to develop exotic financial instruments and transactions unknown even in other parts of the sprawl. He is undecided about whether the proper metric for identifying a bank as “too big” should be if its assets are a certain percentage of GDP — he suggests 2 percent to 4 percent — or simply the size of its assets (Richard Fisher, president of the Federal Reserve Bank of Dallas, has suggested $100 billion).
By breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together. Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. Dismantling them would be a blow against government that has become too big not to fail.
Will points out that his desire to end “too big to fail” is because of his free-market ideology, not despite it. Free-market advocates do ourselves no favors when we allow massive corporations distort the free-market. In the case of banks, the biggest are actually worth more because the market understands that “too big to fail” ensures the government will need to step in once again when disaster happens.
That only one candidate dared to bring up this issue in 2012, including President Obama, is telling; the lobbying power of Wall Street firms is immense. Jon Hunstman advocated a market based solution to this problem, as penned in a Fox News op-ed. Unfortunately he believes in evolution, so his chances of making it past the GOP primaries is minimal.
This is a winning proposition for any party with the guts to pursue it. George Will has opened the door for conservatives, let see if they walk through.