Bring On Johnny Law And Break Up The Banks
Many of us have been insistent on the message that, when it comes to the banking industry, if it's too big to fail, it's too big to exist. Yesterday, the Obama Administration at least hinted at using antitrust law to ensure such a scenario will not happen again.
President Obama’s top antitrust official this week plans to restore an aggressive enforcement policy against corporations that use their market dominance to elbow out competitors or to keep them from gaining market share.
The new enforcement policy would reverse the Bush administration’s approach, which strongly favored defendants against antitrust claims. It would restore a policy that led to the landmark antitrust lawsuits against Microsoft and Intel in the 1990s [...]
Ms. Varney is expected to say that the administration rejects the impulse to go easy on antitrust enforcement during weak economic times.
She will assert instead that severe recessions can provide dangerous incentives for large and dominating companies to engage in predatory behavior that harms consumers and weakens competition. The announcement is aimed at making sure that no court or party to a lawsuit can cite the Bush administration policy as the government’s official view in any pending cases [...]
Ms. Varney is expected to say that the Obama administration will be guided by the view that it was a major mistake during the outset of the Great Depression to relax antitrust enforcement, only to try to catch up and become more vigorous later. She will say the mistake enabled many large companies to engage in pricing, wage and collusive practices that harmed consumers and took years to reverse.
While Ms. Varney is not expected to mention any specific companies or industries vulnerable under the new policy, those who have talked to her about the speech say she is aiming at agriculture, energy, health care, technology and telecommunications companies. She may also be reviewing the conduct of some in the financial services industry, which is now undergoing a wave of consolidation as a result of the financial crisis.
Those last two grafs are the key ones, although I would welcome a return to Clinton-era antitrust enforcement in all aspects of business - the Bush Administration's Justice Department did not file a single case using anti-monopoly statutes.
Simon Johnson, who has long advocated for using antitrust law to break up the banks, sees hope in this new outlook. Since the beginning of the financial meltdown, the industry has consolidated massively, often at the request of the federal government. As a result, consumers are seeing higher charges in bank fees, and considering that banks need profit to negate their capital shortfalls, I expect that to only grow. Antitrust law has a role to play here, though obviously they will run into tension from the Treasury Department. Not to mention wealthy Obama donors, who have brought their opinions to bear on a separate debate, the proposed closure of offshore tax havens:
A report by the General Accounting Office found that 83 of the largest 100 publicly traded US companies had subsidiaries in tax havens or "financial privacy" jurisdictions, as do 63 of the largest US federal contractors (PDF).
Joe Conason wrote earlier this year about the tax havens of bailed out banks around the world. "Don't expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone," he notes.
But back to the class war business. Who is the anonymous "hedge fund" manager sending ominous warnings to Obama in the press? It seems to be the all the rage among rich donors these days -- Orin Kramer has certainly done it before, as has Pimco's Bill Gross, and of course poor little rich girl Penny Pritzker.
Nobody should really be surprised that rich people don't want to pay their taxes. I guess the bigger question is: why aren't there more cosponsors in the House and Senate?
We have very powerful interests, both rich individuals and corporations, asserting their right to break the law, and imploring the Obama Administration to allow them to continue to do so. We'll see where they come down.