"How Naive is Elizabeth Warren?": When it comes to ending cronyism, *endlessly*
Massachussets Sen. Elizabeth Warren was the big winner coming out of last week's #cromnibus debate, based on a speech she gave about last-minute, Citigroup-written changes to Dodd-Frank. She's right, I think, to be bothered by the awful process of the entire budget vote but the actual rule she called out—a provision that affects 0.5 percent of all bank assets—is hardly the problem with Dodd-Frank and the coziness of Wall Street and Washington.
In my latest Daily Beast column, I ask "How Naive is Elizabeth Warren" when it comes to passing effective regulation.
If you're Elizabeth Warren, the answer is endlessly. Earlier this year, for instance, she colored herself aghast that Dodd-Frank, a truly gargantuan pile of words championed by Barack Obama and a Democratically controlled Congress, wasn't working out so well, especially when it came to dispersing concentration in the financial sector. "The four largest banks are nearly 40 percent bigger today than they were just five years ago," she observed. "These banks…are a whole lot bigger now than they were when we bailed them out in 2008 because they were too big to fail."
None of this would have surprised [left-wing historian Gabriel] Kolko, who died earlier this year, or [public-choice economist and Nobel laureate James] Buchanan, who died in 2013. This sort of outcome is the rule, not the exception, whether we're talking about railroads, financial institutions, or "disruptive innovators" such as Uber, which is now starting to collude with municipal governments to make life tougher for its rivals….
With Congress on break, Warren would be wise to read up on Kolko in particular, as he shared many of her larger ideological beliefs while coming to a deeper understanding of regulatory capture:
One thing that leftist historians such as Gabriel Kolko and public-choice libertarians such as Nobel laureate James Buchanan agreed on is that regulatory bodies are routinely and perhaps inevitably "captured" by the very people and businesses they're supposed to oversee. Back in the 1960s and early '70s, Kolko infuriated good-government types with his revisionist take on one of the most clear-cut triumphs of the Progressive Era: the regulation of interstate railroads. Paralleling the arguments of Buchanan and other libertarians, Kolko said that, whatever complaints they may have had about federal oversight, rail barons quickly realized they could lock in their market advantage most effectively through regulation. "It was not the existence of monopoly that caused the federal government to intervene in the economy," he argued, "but the lack of it."