Review in The Daily Beast

Jeffrey Garten of the Yale School of Management writes a review that focuses on what I think is the heart of the book:

“What [13 Bankers] does do, uniquely, is provide a clear and compelling account of the evolution of the relationship between Wall Street and Washington from the days when Thomas Jefferson and Alexander Hamilton argued over how fragmented or centralized America’s banking system should be. It provides the essential context for understanding how the financial and the political worlds in America came to interact as they do, and how Wall Street and all it has stood for—free markets, constant innovation, the glamour of personal wealth—came to dominate American politics so heavily in the past 30 years.”

He also has some reasonable criticisms of our policy proposals:

“I wish I shared their optimism that there is a political scenario in which big banks could fail and not bring down the global financial system with them, but the American public could be light years away from agreeing to the massive government intrusion that would be necessary to implement this book’s revolutionary proposal. . . . Besides that, the authors too cavalierly wave off critical competitive issues of America’s needing big banks at a time when European and Asian financial institutions are bulking up. And although the authors try to come to grips with the question of how big is too big, they, like everyone else, don’t really have a good answer.”

I don’t agree that the “American public” is far away from agreeing to break up big banks. There is a great deal of animosity toward our largest banks, and a great deal of bafflement that nothing has been done to constrain them since the financial crisis. It is more accurate that the Washington establishment is far away from breaking up big banks. But in the medium term, the Washington establishment should (although imperfectly) reflect public opinion.

It’s true that we only spend a few paragraphs on the global competitiveness issue. One reason for that is that this isn’t a primarily policy book; it’s more of a history and political analysis book with an admittedly non-comprehensive policy section at the end. But the other reason, frankly, is that the burden of proof is on the other side. If Jamie Dimon is going to say that big companies need banks, he needs to come up with the evidence, and I haven’t seen it. This is a bit cavalier, but let’s just say I’ve never heard a senior executive of any company, let alone a big one, say, “I wish our bank was bigger.”

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