Insert "Larry Summers Is Too Big To Fail" Joke Here

National Economic Council director Lawrence Summers should try staying awake during his meetings with the president. Last week the husky, unlikable super-genius revealed a little too much about the administration's view of too-big-to-fail banks in an interview with PBS:

JEFFREY BROWN: The too-big-to-fail issue, why not go further? Why not just limit the size of banks?

LAWRENCE SUMMERS: Jeff, that was the approach America took to banking before the Depression. That was the approach that America took to lending in the thrift sector before we had the S&L crisis.

Most observers who study -- who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to serve large companies and hurt the competitiveness of the United States.

But that's not the important issue. They believe that it would actually make us less stable, because the individual banks would be less diversified and, therefore, at greater risk of failing, because they would haven't profits in one area to turn to when a different area got in trouble.

And most observers believe that dealing with the simultaneous failure of many -- many small institutions would actually generate more need for bailouts and reliance on taxpayers than the current economic environment.

Seeking Alpha has a list of what "observers" are actually saying. HuffPost cites some more. Here's an angry reaction from Alternet, which is kind of dumb -- but when you're an intellect as might as Larry Summers, where are you going to find interlocutors of your caliber?

More serious than Summers' well established habit of citing a fake consensus of experts to support his claims is that these comments embarrass an administration that is trying to promote the fiction that it is seriously interested in ending bailouts for gigantic banks. It might make intuitive sense that regulators would rather deal with a few big, identical institutions than with many diverse ones, but that's not the story the Democrats are using to sell their financial reform plan. So between Thursday and yesterday, somebody must have found a woodshed big enough to take Summers out to. Here's what he had to say on one of the Sunday talk shows:

"We must end too big to fail," he said on Face the Nation. "There is no one associated with the White House who believes "too big to fail" is acceptable, or that it's acceptable for financial institutions to rely on a bailout."

Glad that's squared away.

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  • ||

    Quadruple-chinned nacroleptic lump of arrogant incompentence.

  • Larry Summers||

    (zzz-snorrt-gassp)

    Uh, I do not have five chins, a-hole!

  • ||

    Most observers who study such things disagree.

  • Warty||

    He looks like a bag of floppy penises.

  • ||

    Mr. Wong Burger: Do we have to fuel up with some dicks?

    Rice Mascot: Yes, we got a full tank of dicks.

  • BakedPenguin||

    Speaking of shows in steep decline...

  • ||

    Yeah, well, you can't win them all. Just watch it fucked up and the absurdity of it all is still pretty good.

  • ||

    You'd think he'd stop falling asleep in meetings after the time a staffer took that picture of Tim fucking one of Larry's neckfolds.

  • ||

    Ah, seems like "the Science is Settled" here. Sorry opponents on the Left, Right, or Center, the Consensus of Nameless Experts is against you.

    It is one of their favorite rhetorical moves.

  • ||

    "We must end too big to fail," he said on Face the Nation. "There is no one associated with the White House who believes "too big to fail" is acceptable, or that it's acceptable for financial institutions to rely on a bailout."


    So Fannie, Freddie and AIG are cut off? No more loans for them, no more covering their bad bets?
    Woo Hoo!

  • ||

    I also await the application of the principle to the UAW, the SEIU, etc.

  • ||

    There is no one associated with the White House who believes "too big to fail" is acceptable,

    Then why does their financial reform bill have a fast-track bail-out loan guarantee facility in it?

    Then why does their thousand-plus-page financial reform bill have not one word about breaking up big institutions?

  • mr simple||

    Leaving the veracity of his statements on what the administration believes aside, his two statements do not seem to contradict each other. In the first he is saying that large banks should not be forcefully broken up and in the second he is saying the big banks should not be bailed out. I don't see anything wrong with that. Of course, I only read the quoted parts. If there is a different meaning in the parts left out, well I am too lazy to click through.

    Also, it seems all the experts quoted in the second round of links are government employees who suffer from the delusion that the government can solve all problems and regulate away the pain.

  • ||

    How about changing the bailout policy so that if you get a bailout, you get broken up? Otherwise he leave the banks alone, only if they ask for a bailout will they get broken up.

  • ||

    Most observers who study -- who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to serve large companies ...

    Fucking priceless. Ask me again why I'm a libertarian.

  • CJ||

    This should be quoted when someone (usually on the left) brings up rich people not being taxed enough and that being the fault of libertarians and Republicans.

  • ||

    I'd like to be Consensus Czar.

  • Wesley||

    Most observers who study -- who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to serve large companies

    I don't have a Ph.D. in Economics like Dr. Summers (I didn't flunk out of Physics either though), but I think bonds were created to solve this very financing issue. Do they still teach about those at Harvard?

  • BakedPenguin||

    Is Harvard too big to fail?

  • ||

    Don't be so hard on Larry. Listening to the Ascended One wears me out, too.

  • ||

    the individual banks would be less diversified and, therefore, at greater risk of failing, because they would haven't profits in one area to turn to when a different area got in trouble.

    Because all the "real" bankers have MBAs, and have never been taught, "Don't put all your eggs in one basket."

  • ||

    What do MBAs learn, anyway? That was about the first damned thing they taught us in my first Finance class: "Diversify, account for inflation, diversify, time value of money, diversify."

  • T||

    What they teach in school and what you retain after 10 years is two different things, but yeah, they cover diversification. For about 30 seconds. They're more concerned with making sure you understand the mechanics of the various instruments than what the underlying asset behind the instruments is.

  • ||

    I had several professors tell me that I was learning considerably more as an undergraduate (majoring in Finance) than I would in an MBA program. My wife, who has an MIS and an MBA, agrees.

  • T||

    My MBA program was 54 hours because I lacked the prerequisite business degree. 12 of those were my certification in Management of Technology. Not a whole lot of time left for covering anything in detail. There are many reasons I refer to the MBA as the catfish of graduate degrees.

  • ||

    Larry Summers though that the first bank asking for a bailout was too small.

    Larry Summers though that the second bank asking for a bailout was too big.

    Larry Summers though that the third bank asking for a bailout was just the right size.

    What's the right size? Any goddamn size Larry Summers feels like.

  • peachy||

    So, you're saying Summers is actually Goldilocks? Wow, she's really let herself go... (PTSD from the bear-mauling, maybe.)

  • ||

    He's definitely living in a fairy tale.

  • ||

    Woodland creatures dress him every morning. And then he deep-fries them. And eats them. With his mouth.

  • ||

    Only in the Beltway.

  • Warty||

    Only after he covers them first with his delicious, delicious buttsauce. He once tried to bottle and market his buttsauce. After that failed, he had the staffer in charge of the venture fed to dogs, which he then ate.

  • creech||

    "We must end too big to fail," he said on Face the Nation. "There is no one associated with the White House who believes "too big to fail" is acceptable, or that it's acceptable for financial institutions to rely on a bailout."

    Isn't this the "nonsense" that those racist, etc. etc. Teabaggers believe?

  • Pinochet||

    BakedPenguin|4.26.10 @ 2:09PM|#

    Is Harvard too big to fail?

    When the blood and brains of academics (lined up for the firing squad en masse after their collective trial (they believe in collective justice, right?) where their guilt is established prima facie for we are not mere murderous barbarians but upholders of the law, after all) are splattered against the terra cotta brick walls of her lovely campus, that will be the moment Harvard stops failing.

  • Pol Pot||

    Can I get in on that action? If there was one thing I learned in the universities of France from that strange mix of Communism and Existentialism in the air at the time was they could not justify a reason for me not to kill them.

  • Kroneborge||

    +1

  • Kroneborge||

    Unless we break up the big banks, they will ALWAYS get bailouts because the results to the economy could be to bad otherwise.

    Thus simple solutions to limit any future problems so we just get a recession instead of a depression.

    1. Break up any financial insutitioin that is to big to fail.
    2. Limit leverage
    3. Make sure that bonuses are based on long term performance.
    4. Limit or stop securiization (no more off balance sheet financing). If a bank wants to make more loans, they can issue bonds, they should have to keep the risk on their books
    5. Put derivatives on an OTC exchange.

    Remember, banking and finance should be BORING. Innovation is great for technology, but when it comes to finance, it's usually just a way to screw someone else out of money.

  • bill woolsey||

    I don't know about serving big companies, but the argument in favor of geographic diversification is sound.

  • bill woolsey||

    I think the solution is to for really big banks to fail.

    I think nationally branched banks are a really good thing.

    I don't think having commercial banks underwrite securities is a problem.

    I don't even think it is so bad to have banks do broker-dealer trades.

    What happened is that some really politically important banks--one commercial and one "investment" lent heavily into a speculative bubble. They lost a lot of money. All the rest of the supposed "problems" are just window dressing.

  • ||

    If they're big enough, they'll get bailed out.

    The only way to prevent bailouts is to break up the big ones.

  • Kroneborge||

    +1

  • ||

    I am reading this is all linked to Global Governance. The issues of the financial crisis and climate change attempted to use a manufactured crises to usher in Global Governance.

    With Globalism economies around the world were intertwined so that a MANUFACTURED financial crisis could be used to usher in Global Governance. See the BIS and the IMF and their attempt to implement a "bankers tax".

    Who is the BIS ? How is it that an unelected body can tax anyone; is this not taxation without representation ?
    Is the BIS an elected body ? Who is on the BIS ?

    How about the Carbon Tax that was pushed forward by what we were told was good data but now appears to be manufactured data as well. A data set that was constructed so that when "analyzed" only a limited set of conclusion could be drawn. Talk about manipulation. The data set is flawed hence the desired out come by Mr. Summers should be questioned ... Global Governance.

    Both issues address the issue of our time; Capture.

    This is an attempt to Capture people, with the greater good argument being used, which on its surface sounds nice however ... implicit with greater good thinking is a willingness to sacrifice individuals for the greater good ~ talk about heartless.

    The alternative that is fighting this Collectivist world view is the Individualist world view, where that at no time should the individual ever be sacrificed for the greater good. The rights of the individual must be protected.

    Protection of rights coupled with empathy for you fellow man is a world view that is compassionate as it avoids the distanced, detached logial mental exercie of a sacrifice for the greater good being within the parameters of our model for society.

    Weighting of the Individual over the Greater Good.

    The greater good perspective is heartless cloaked in a nice candy coating. Once the sugar high wears off its darkness is revealed.

    What bothers me most is that this is the issue of our time and instead of it being the center of attention we are led off the path to participate in ping pong matches that fail to address the issue; a willingness to sacrifice for the greater good vs defending at all cost the rights of the smallest minority~ the individual.

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