Elizabeth Warren

"How Naive is Elizabeth Warren?": When it comes to ending cronyism, *endlessly*

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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.

Here's part of my answer:

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."

Read the whole thing.

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  1. All you have to do is cobble together and pass the right gargantuan reform legislation. Then utopia.

  2. “The four largest banks are nearly 40 percent bigger today than they were just five years ago,”

    This was exactly the intended result of the post-crash regulatory cleanup. The Fed forced the sale of dozens of smaller banks to the big boys. Increased regulatory burdens, of course, always favor the big boys.

    Foreseeable results. Hell, these weren’t even unintended consequences. This is what the administration and the Fed set out to accomplish.

    1. I’ve said this before, but I was playing poker with my parents and their friends a year or two after the bailouts. One of the guys turned out to be the president of the small-medium regional bank. I’ve never met anyone else as pissed about the bailouts as him.

      1. Just think about the opportunities for competition land innovation lost by the bailout.

        1. No, no, just think of all the financail collapse and anarchy avoided by the bailouts.

          Why, if not for the bailouts, I’d be dining on your leg, right now. Rampant cannibalism was the logical next result.

    2. It is a whole lot easier to supervise a few big banks than a whole bunch of small banks. In addition, TBTF banks have exceeding deep pockets for political “contributions”, can be shaken down for vast sums pretty easily, and can be counted on to support any monetary or fiscal insanity that the Fed or Congress comes up with.

  3. She may be naive. Or she may know damn well what she’s doing and the apparent naivete is just a front to fool her brain-dead followers.

    1. Exactly. She doesn’t believe that the “right people” will do a good job of impartially regulating the banking industry. She believes that SHE is the right people, and that she should be able to dictate how our financial institutions operate. For our own good, of course, although she would expect tokens of our gratitude and that of the banks she rules.

      1. This sentiment sounds a lot like the Republican establishment (Bush family, McCain, Romney, etc…). They aren’t against government intervention into the market or personal choices, they are just convinced that they are better administrators than the Dems. At this point everything is a fight for the “right people” and very few understand that the whole premise is bankrupt.

        1. This provides an endless churn for the politicians. The programs are never at fault, the economics of regulatory capture are never acknowledged, it is always the fault of the voters for electing the wrong masters.

          In a two-party system, this allows every election cycle to be based on finger-pointing. “Regulations aren’t having the desired effect! Somehow, they just become ever more bloated and ever less capable of achieving the result they are allegedly intended to achieve. But, vote for the other team and we will fix all that!”

          Meanwhile, the permanent unelected bureacracy goes on, and the flow of campaign funds to both sides continues.

  4. As naive as anyone who was stupid enough to ever seriously believe that Barack Obama would improve race relations in America.

  5. “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.”

    And her plan will be: PROG HARDER!
    Because that’s totally not how we got in this situation to begin with.

  6. Did anybody else read the headline as “How Native is Elizabeth Warren?

    1. Answer: 1/20th!!!

      WHAT DO I WIN?!?!?!

      1. I thought her claim was 1/36th?

    2. Yes, I did too.

    3. And you are ALLLLLL RAAAAAAAACISTS

  7. Regulatory capture is inevitable, and it is probably for the best in current environment. In order to write regulations, person regulating must have some clue about business they are regulating – otherwise, its going to end in disaster. People who have best clue about how a business runs on a day to day basis are insiders with hands on experience, and naturally, they will be sympathetic not just to their business model, but to their old firm as well. Who wouldn’t?

    So when it comes to regulations, there only two options – clueless idiots who will destroy everything, or sympathetic insiders, who will drive out competition but will at least ensure smooth operation for existing processes.

    1. In other words, the choices are socialism or fascism.

      1. Or an unregulated world where the Koch brothers mercilessly walk around on corpses and enslave 12 year olds to work in the mines.

        1. Pretty much. The moment you suggest maybe backing off the regulations a bit, it will be ‘Somalia! Exploding roads! Child warlords! Donkey sex slaves! Cats and dogs living together!’

          In current environment, this suggestion will not play well.

  8. How come Lizzie’s mouth is open in every picture of her.

    Does she have some medical condition that prevents her from shutting her trap, or something?

    1. Is she standing beside Bob Mugabe in that photo?

    2. She’s only lying when her mouth is moving.

      1. Naw, she lies to herself all the time. Every proggie does. Every politician does. Every statist does.

  9. She isn’t naive at all. The only think different about her is her money comes from Wall Street lawyers, not the banks. More regulations = more fees.

    http://www.nationalreview.com/…..williamson

    1. That is a good, typically insightful Willamson article. Don’t know why he doesn’t get cited more by reason. Must be cuz he is kinda “churchy”…

      1. Because he’s a screechy hysteric who undermines his own arguments with his obsession about imposing his morality on others.

      2. Because Williamson is an economic conservative, not an economic liberal. He, often like Ponuru often shits all over more libertarian economic suggestions for various reasons usually coming down to “this class that I like and who is receiving favorable tax treatment right now will be hurt by this regulation.”

        That he can always be trusted to give thoughtful and often insightful commentary that skewers Dems is a given. But his foundation still has the assumption that the government has a rightful place encouraging a better citizen. Like most Republicans, his view of a proper citizen differs from Dems, so he will often be at odds with them. He is also smarter than others in realizing that one can use economic incentives and market forces to realize these gains.

  10. Kolko was familiar to most of the libertarians “hatched” in the 60s and 70s. For many, it was the foundation of our opposition to crony capitalism. Rand’s books portrayed the same antipathy. Yet, today, the Left still gets away with building a strawman caricature of libertarianism as backing rent-seeking, regulation-capturing crony capitalists.

  11. The corporations control the government because the government doesn’t have enough power to control the corporations that control it! Give more power to the government and it will be able to control the corporations that control it! Then we’ll bring power to the people since the people are government, and when the government controls the corporations that control it, the people will control the corporations that control the government! Power to the people!

    1. And when that doesn’t work it’s because the government didn’t have enough power or spend enough money. And when that doesn’t work it’s because the government didn’t have enough power or spend enough money. And when that doesn’t work it’s because the government didn’t have enough power or spend enough money. And when that doesn’t work it’s because the government didn’t have enough power or spend enough money. And when that doesn’t work it’s because the government didn’t have enough power or spend enough money. And when… well you get the point.

      Progressives, the originators of the self-licking ice cream cone.

  12. Nobody listens. I’m a lobbyist and I enjoy my work. But I tell a progressive that rent seeking and regulatory capture grow with the size and power of government, they dismiss it, cause i’m clearly a moron who has no idea how things in DC work.

  13. Elizabeth Warren will save us all. Using populism she will harness the power of millions of stupid people and with it she will do smart things. Makes perfect sense.

  14. The only thing she might be naive about is if she honestly thinks she is doing more good then harm.

    1. That strikes me as a pretty big if.

  15. I’m not so concerned about the potential “naivete” of EWar, but more about the stupid fucks who elect schmucks like her. Them I’m like to take out behind the barn and “put down”, as we used to say about useless farm animals and sick pets when I was growing up.

    Cause they’re that ignorant and dangerous, and I’m tired of suffering the elected hell rained down on me by every level of govt (except local – no complaints there) by my stupid fellow citizens. Cause I didn’t vote for ANY of the fuckers who won….

    1. Have you heard of seasteading? Perhaps you would like to live on one if the idea works out.

      1. Yep. Seriously considering this.

        Or Costa Rica or someplace like that. Cause I hate people, esp my countrymen who fuck up my life.

        Leave. Me. ALONE.

        That’s all I ask….a simple request.

        1. But Almanian! I’m here to help you!

          /Ignores NO SOLICITORS sign and rings doorbell incessantly.

  16. I braved the comments!

    steveraxx 11 minutes ago

    Always entertaining how terrified the republican-malel remains over woman who are far more intelligent than them.

    You’re welcome.

    1. malel

      Typo, or new SJW term? I can never tell.

  17. She’s faux-na?f. And therein lies the problem.

  18. She’s right, I think, to be bothered by the awful process

    I’m sure she will devote her energies for the remainder of her Senate career to fixing the rules to bring only clean, streamlined, easily comprehensible Bills to a vote.

  19. Fauxcahontas heap big naive.

    1. Many moons.

    2. She is not heap big naive.

      Lieawatha speak with forked tongue.

  20. One thing you guys had to notice was the rapid and sudden appearance of a slew of defenses and apologia for the Import-Export Bank, from people like Moveon dot org and others. Quite a thing, ain’t it?

  21. I’m a lobbyist and I enjoy my work.

    GET A ROPE, SOMEBODY!

    1. I have finest quality for sale. Used only once!

  22. “The four largest banks are nearly 40 percent bigger today than they were just five years ago,”

    This was exactly the intended result of the post-crash regulatory cleanup. The Fed forced the sale of dozens of smaller banks to the big boys. Increased regulatory burdens, of course, always favor the big boys.

    I do my banking at a bank which has no more than a half-dozen branches, all in Montana. You know, the sort of bank the Treasury and the Fed seem to be actively attempting to drive out of business. One of these days, I fear, I will walk up to the door and see a big cheerful sign saying, “Welcome, Wells Fargo customers!” I dread that day.

    1. It will more likely be absorbed by Bank of America.

      That company is the scum of the earth.

      1. I read that as “be aborted by BoA”

        Almanian – big monster, or BIGGEST monster?

  23. TeeTime 9 minutes ago
    Tell you what, Nick — Warren is brighter, more knowledgeable, and more insightful and incisive than you are. For her — and, to be fair, for some others on all sides of these arguments — facts and reality shape ideas. It’s not a reverse engineering of polities, as you seem to think. The reality comes first, and that’s what shapes their opinions. Your analysis is idiotically wrongheaded in conceiving her as an ideologue or politician first. Not at all. You’re way, way off. And she can think you into the ground, so I would stay clear lest you look even sillier than you do.

    1. That convinces me! Where do I get my Warren button?

    2. And she can think you into the ground

      Well, yeah, she could probably get you to fall over from the derp. Seems legit…

    3. It’s like the need to believe that your favorite pop star is the Most Talented Evah!

      Warren is brilliant, so brilliant that proles like you cannot even comprehend her enormous intellect. I don’t need to discuss specifics of actual policies. I just vote for a Top Woman who will do my thinking for me, and then defend her actions by citing her incredible intelligence.

      1. Dude, she could think you into the ground. Into. The. GROUND.

        *mic drop*

      2. You gotta love the religious devotion some have to her ilk. Of course, that may indicate the likely source of that devotion.

  24. plwinkler 13 minutes ago
    “The best thing the government can do when it comes to the concerns of Warren and other progressives is step down rather than step up.”

    Nick Gillespie and other libertarians desire a return to laissez faire capitalism. In other words, no regulation. He is the one who’s being naive.

  25. palouse1 36 minutes ago
    Where has the author been for the past 7 years? There was no choice in bailing out the banks. We don’t know for certain what would have happened had the government let them fail, but it would probably not have been good.

    It was these same banks who put together these worthless real estate bundled products on the market and sold them as AAA rated.

    No bankers or anyone from the ratings agencies were ever charged with a crime while millions lost their jobs, homes, and pensions.

    To those of us who spent a lifetime as blue collar workers, Elizabeth Warren is a breath of fresh air. A United States Senator who is not for sale. What a novelty.

    1. Elizabeth Warren is a breath of fresh air. A United States Senator who is not for sale. What a novelty.

      And we’re the naive ones. What a sucker.

      1. Hey, just like Barack Obama, Elizabeth Warren only comes around once in a generation as a truly transformational, healing figure.

    2. No bankers or anyone from the ratings agencies were ever charged with a crime while millions lost their jobs, homes, and pensions.

      I remember when the housing market started to break. There was a woman on one of the local Sunday talk shows relating her tale of woe. Her husband was a cab driver and she was a perfume saleswoman at Macy’s. They had a house in Queens. They got the bright idea that they needed a McMansion on Long Island, which they borrowed up to the hilt to buy. They didn’t bother to sell their place in Queens to finance it. When rates went up, they lost both places. If things worked differently, they’d be talking about what geniuses they were. I’m not going to pretend they got “screwed” by the bank.

      People like palouse1 want to pretend that these guys were the victims of “evil bankers” rather than their own greed. They’ll tell you they think we should throw bankers in jail for “letting people lie on their loan applications”. But, suggest for a second that maybe the people who actually, you know, lied on their loan applications deserve jail time and they’ll paint you as Mr. Potter from It’s a Wonderful Life.

      I’m not going to suggest the banks were blameless. They should have been the ones who knew better. And their punishment should have been to fail. But, it wasn’t Goldman Sachs who sponsored Flip This House. And it wasn’t JPMorgan Chase who bolstered their political career on “record home ownership”.

  26. billharris 1 hour ago
    Sure, Warren should read Kolko. And so should our bed-wetting author, who obviously hasn’t.

    Otherwise, he’d realize that Kolko made statements such as ‘Capitalism is neither stable nor rational’. Moreover, he wrote that what we myopically see as stability is big-government-big business collusion that gave birth to the modern corporation.

    So what leftist is he going to cite next in defense of ‘free-markets? Karl Marx?

    Now Kolko, of course, was making ‘historical’ statements which, translated into baby-talk that Gillespie can understand, means ‘events that happened in the past’. So as to whether or not Warren can effectuate a meaningful rupture remains an interesting possibility–ostensibly beyond the intellectual and moral capacity of this semi- literate libertarian.

    BH

  27. BFaul 1 hour ago
    “As much as Wall Street might want to believe it controls all aspects of the economy, they couldn’t have screwed it up all by themselves. It’s time to let them try.”

    What an incredibly stupid thing to say. Let them try? Are you out of your mind? Who do you think will have to bail them out again if we “Let them try” and they succeed? The bursting of the housing bubble wasn’t what caused the nuclear meltdown of the economy. That was the detonating cap, but the explosive was the bets and counter-bets made on those mortgage backed securities. It’s the derivatives stupid. Warren Buffet warned people about derivatives a couple of years before the meltdown, but of course they didn’t listen. Is this what libertarianism has degenerated into? – to deregulate the banks, let them run wild again and see if they will put us into another great depression?

    1. Do these people even know what derivatives are?

      Also, didn’t Buffett make a shit-ton of money trading derivatives?

    2. I wonder if BFaul can show me on the doll where derivatives have touched him.

      Strictly speaking, derivatives are just bets with imaginary money on imaginary outcomes. Their collapse would have little impact on overall economy, no more than me betting a $trillion on a poker game and losing. I don’t have a $trillion and neither does my counterparty, and that’s the end of that.

      Bailouts though channeled real resources (more real anyway) to backstop imaginary bets. This had real economic consequences.

  28. The comments at TDB are fucking retarded. “No! You’re naive!”

    1. “You’re a towel!”

  29. See, it’s people who post these comments that brave, brave Warty was so kind to post, who make me want to kill myself.

    Because – truly – there is no hope. People really are that FUCKING STUPID. And that would be fine, if they’d not them INFLICT IT ON ME.

    GAH!

    1. People have always been this stupid. Everywhere. And yet there are 7 billion of us, many living nice lives, and generally always improving.
      I think it’s kind of positive.
      Voluntary cooperation and innovation are so much more powerful than stupidity and evil, that these statists may win many, many battles, but are not winning the war. At least not yet 😉

      1. It’s so cute when people still have hope 🙂

      2. PS Voluntary cooperation and innovation are so much more powerful than stupidity and evil

        The history of man says that’s where you’re wrong…

        1. The history of man says he is right, actually. We’ve come a long way from even just a century ago, both in terms of individual liberties and in terms of economic, intellectual, and technological wealth.

    2. Because – truly – there is no hope. People really are that FUCKING STUPID. And that would be fine, if they’d not them INFLICT IT ON ME.

      They used to inflict it on you by decapitation, the Holy Inquisition, starvation, and concentration camps. There is a lot less of that nonsense going on today.

      Yes, progress may seem slow, but the world really is getting better.

  30. There was no choice in bailing out the banks. We don’t know for certain what would have happened had the government let them fail, but it would probably not have been good.

    There’s your trouble.

    FAILURE IS ALWAYS AN OPTION.

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  32. To determine if someone is an adherent of the regulatory fallacy ask this question: Do you believe that given the degree that the tax burden was shifted from the rich to the middle class, was there any type of regulatory policy which would have prevented the financial crisis? If they answer yes, they are adherents to the regulatory fallacy

    A slight variation on the regulatory fallacy is the financial innovation fallacy. As with the regulatory fallacy, both left and right versions, there is a miniscule grain of truth to it. Financial innovations such as credit default swaps and regulatory changes slightly affected the exact timing of the onset of the depression. However, once the tax burden was shifted from the rich to the middle class it was just a matter of time before middle-class consumers became unable to absorb the increased production and service the debt that accompanied the overinvestment. Different regulatory policies might have shifted the bubble more towards commercial real estate rather than residential real estate or visa versa but the outcome would have been similar.

    Blaming regulatory policies and financial innovation for the depression is like blaming the armaments manufactures and soldiers for World War II. In order for the war to occur there had to some weapons made and some soldiers to fight. If those particular armaments manufactures and soldiers were not available, others would have taken their place….”
    http://seekingalpha.com/article/1543642

  33. or “disruptive innovators” such as Uber, which is now starting to collude with municipal governments to make life tougher for its rivals

    I think you can hardly blame Uber for “colluding with municipal governments”, given that municipal governments have given them the choice of colluding with them or not doing business at all.

    When government and business collude, the blame always logically falls 100% on government.

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