THE BLOG
03/18/2010 05:12 am ET | Updated May 25, 2011

Larry Summers' Genius Clouds His Judgment: Regulating the Banks Will Not Work

"Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it is the only thing that ever does"-Margaret Mead

Larry Summers, the President's point man on the economy and financial regulation, is said to be a genius. With the DNA of two Nobel Laureate economists in his genome, one might think he would have the best grasp of how to fix the broken financial system.

One would be wrong. Summers would be the best to design a rational system, but it would be very difficult for him to recognize that the actors will not see everything the way he does. And so, he would have greater confidence than justified that the system he designs will work.

That confidence may be conveyed to the President, and thus, even with the best of intentions, Summers can lead him and the country down the primrose path to another catastrophe.

Dick Durbin (D-Ill.), the number 2 person in the Senate leadership, has put it simply: "the banks own Congress." Summers cannot incorporate that observation into his econometric models. Thus, the entire edifice of economic security and protection crumbles.

Big banks' pursuit of increasing profits--exactly what their shareholders and the economic system dictate as a proper goal--inevitably causes them to undertake actions that can, and have had devastating consequences for almost everyone in the world.

No 'malice aforethought' need be invoked. Miscalculation is sufficient to wreak havoc on the life achievements of hundreds of millions of people. And, we know with certainty, that the big banks will use their pivotal position in the economy and their economic resources to quash democratic processes when they are inimical to their profit-making/power-wielding interests.

Lest there be any doubt of that power, one need only note the following confluence of events: the current economic catastrophe, the banks' collapse, the taxpayers' bailout, and yet, in spite of all that, the big banks' ability to prevent Congress from enacting strong financial reform with strong consumer protection. Their lack of any embarrassment at all--other than getting caught--with awarding enormous bonuses only underscores their power.

Wall Street has far more power even than the very powerful insurance + pharmaceutical industries. Good evidence for this is that, despite the enormous loss of wealth and heightened insecurity suffered by almost everyone in this economy--i.e., that keeps the matter roiling in everyone's consciousness--Wall Street has been able to have its way with Congress, reducing new regulations to a joke, awarding themselves enormous bonuses while still owing tens of billions to the Treasury and while the rest of the economy is still reeling from the damage it caused.

Breaking up the big banks is not a Democratic, Republican, Independent or Libertarian, or liberal or conservative position. It is a common necessity to restore democracy to our politics and some security to our economic system.

It is not that the banks are "too big to fail." It is that they are so big that they can cause you and me to fail. That is not Adam Smith's capitalism; it is a system that inevitably breeds rogues.

For this reason we have started a mass movement called "BreakUptheBigBanks.com." Together, millions of citizens, regardless of political persuasion on other issues, by sacrificing only the price of a latte, can counteract the banks' corrosive power and sleep better at night, knowing that they will not awaken the next morning to discover that, without even knowing what was happening, their life's work will have vanished in a sea of credit default swaps.

It is probably the one domestic matter behind which everyone can rally.

Take a minute to click, to join, to help.