Thursday, December 02, 2010

Worst Congress Money Can Buy?

Jim Gust is a bit hard on Warren Buffet, whose fondness for the estate tax can't have much to do with Berkshire-Hathaway's insurance holdings. Mostly those holdings involve property and casualty insurance, as the American Family Business Foundation report acknowledges. Life insurance operations are trivial.

Nevertheless, the life insurance industry obviously spends big in order to gain the "access" necessary to steer Congress in the desired direction. It may even outspend banks who are determined too big to fail. Said banks are the subject of a NY Times op-ed by Thomas M. Hoenig, who presides over the Federal Reserve Bank of Kansas City.
[T]he five largest financial institutions are 20 percent larger than they were before the crisis. They control $8.6 trillion in financial assets — the equivalent of nearly 60 percent of gross domestic product. Like it or not, these firms remain too big to fail.

How is it possible that post-crisis legislation leaves large financial institutions still in control of our country’s economic destiny? One answer is that they have even greater political influence than they had before the crisis. During the past decade, the four largest financial firms spent tens of millions of dollars on lobbying. A member of Congress from the Midwest reluctantly confirmed for me that any candidate who runs for national office must go to New York City, home of the big banks, to raise money.
As for the argument that we need humongous banks to compete globally, Hoenig doesn't buy it.
More financial firms — with none too big to fail — would mean less concentrated financial power, less concentrated risk and better access and service for American businesses and the public.
How would you characterize our largest financial institutions? 800-pound gorillas … or 800-pound stumblebums?

1 comment:

Jim Gust said...

Certainly the tax legislative fiasco has only one precedent that I know of. That would be the passage of Obamacare. Thus, this qualifies as the very worst Congress that money can buy.