SLL does not take a lot of swipes at Paul Krugman because frankly, he’s a pompous idiot who’s not worthy of the effort, and there are plenty of other sites who do a fine job of taking him down. However, this article is less about him and more about the state of contemporary banking, a subject in which SLL has a keen interest. If you think the Too Big To Fail banks are safer now than in 2008, when they would have gone bankrupt without a helping hand from the federal government, you are mistaken. From Michael Krieger at libertyblitzkrieg.com:
Paul Krugman made the above statement in 1998, and while I stand guilty for plenty of bad forecasts, Krugman’s internet call is arguably the worst prediction in human history. Naturally, that doesn’t prevent the man from retaining his tenured position of punditry at the New York Times, a perch from which he continues expose millions of unsuspecting Americans to his incoherent, status quo coddling nonsense.
It appears Senator Elizabeth Warren of Massachusetts has had enough.
The Huffington Post reports:
WASHINGTON — Sen. Elizabeth Warren (D-Mass.) appeared to offer a thinly veiled rebuke of liberal economist Paul Krugman on Wednesday by highlighting a “scary” too-big-to-fail ruling from federal bank regulators.
The Federal Reserve and the FDIC said Wednesday that five of the biggest banks in the country cannot credibly be unwound safely without bailout money from taxpayers.
“This announcement is a very big deal. It’s scary,” Warren said in a written statement. “After an extensive, multi-year review process, federal regulators concluded that five of the country’s biggest banks are still — literally — too big to fail. They officially determined that five U.S. banks are large enough that any one of them could crash the economy again if they started to fail and were not bailed out.”
But Warren directed her sharpest words at an unnamed set of people who have recently downplayed the role of big banks in the financial crisis and questioned the value of breaking up big banks — an apparent reference to the Nobel Prize-winning Krugman.
“There’s been a lot of revisionist history floating around lately that the Too Big to Fail banks weren’t really responsible for the financial crisis,” Warren said. That talk isn’t new. Wall Street lobbyists have tried to deflect blame for years. But the claim is absolutely untrue.”
“There would have been no crisis without these giant banks,” Warren continued. “They encouraged reckless mortgage lending both by gobbling up an endless stream of mortgages to securitize and by funding the slimy subprime lenders who peddled their miserable products to millions of American families. The giant banks spread that risk throughout the financial system by misleading investors about the quality of the mortgages in the securities they were offering.”
To continue reading: Elizabeth Warren Takes a Swipe at Paul Krugman’s “Revisionist History”