In Sunday's Book Review, economics writer Louis Uchitelle reviewed "13 Bankers - The Wall Street Takeover and the Next Financial Meltdown [1]," by Simon Johnson and James Kwak. The text box accurately encapsulated Uchitelle's simplistic left-wing theme of greedy bankers lining their pockets with your money: "Your Money, Their Pockets - Don't believe the bankers who bet your investments on a self-correcting market." And guess which president started it all?
Seldom in our 230-odd years as a country have Congress and the White House had the fortitude to impose on American bankers and financiers a set of regulations sufficiently stringent to prevent them from pushing us into destructive panics and recessions. And once again Washington may be demonstrating its lack of backbone.
As Simon Johnson and James Kwak recount in "13 Bankers: The Wall Street Takeover and the Next Financial Meltdown," the struggle to keep bankers in check goes back to Thomas Jefferson and Andrew Jackson, with results that have usually been mixed. Given the leeway to undermine the economy, bankers and financiers have done just that.To put it bluntly, as this book does: the efficient-market hypothesis does not work. It never has. Markets are not self-correcting. Left to their own devices, bankers at the biggest institutions can't seem to stop themselves from speculating with borrowed money until they inevitably crash the system.
Next came the crack at Reagan, but not even the Obama administration is sufficiently anti-free market for Uchitelle:
Ronald Reagan, of course, brought us back to the efficient-market hypothesis with its faith in laissez-faire - a faith embraced, to one degree or another, by all of Reagan's successors as well. Who needs government oversight when markets correct themselves, they agreed, and so they stood by as regulations disappeared or were canceled. Even the Obama administration, seeking to revive regulation, has not easily shaken off the old faith in markets - and "13 Bankers" needles the president's team on this point.
Uchitelle regularly pushes liberal nostrums in his reporting. He attacked Reagan's tax cuts in a March 2008 report [2], and called for a doubling of the minimum wage [3] in a 2006 book, "The Disposable American: Layoffs and Their Consequences."
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