Who is that handsome socialist from Wisconsin, and what has he done with Rep. Paul Ryan?
A Bloomberg View piece on Wednesday in support of the Volcker Rule (or, at least, what the Volcker Rule used to be) used as its launching pad recent comments made by an apparent Ryan imposter at a Wisconsin town hall that also seemed to support the Volcker Rule:
[I]f you’re a bank and you want to operate like some non-bank entity, like a hedge fund, then don’t be a bank. Don’t let banks use their customers' money to do anything other than traditional banking.
Wha-wha-wha? This is a somewhat surprising thing to hear from the mouth of Ryan (R-Wis.), who opposed the Dodd-Frank financial-reform law, which included the Volcker Rule -- intended to keep banks from, how do you say, using their customers' money to do anything other than traditional banking.
In Ryan's remarks, which were first reported by ThinkProgress, he also appeared to endorse breaking up banks that are too big to fail, something that is maybe a little more palatable for Ryan's fellow conservative travelers, like Dallas Fed President Richard Fisher:
We should make sure you can’t get too big where you’re going to become too big to fail and trigger a bailout, and if you take risky behavior then you go into bankruptcy and we open up the bankruptcy laws to allow them to go into bankruptcy.
Sounds reasonable. But it is kind of a weird thing to hear from Ryan, who has opposed the Dodd-Frank rules that will do exactly the kind of stuff he is talking about. As the Washington Post's Suzy Khimm explained recently:
On financial regulation, Paul Ryan’s 2013 budget basically cuts and pastes its recommendations from last year: It wants to repeal parts of Dodd-Frank that give new power to federal regulators to break up big banks, arguing that the regulations actually make bailouts more likely, not less so. Ryan isn’t proposing an alternative, however, so his plan to repeal the government’s new “resolution authority” would bring us back to the pre-Dodd Frank era — which was also, of course, the era in which bank bailouts proved necessary.
So how does Ryan explain himself? You could give him the benefit of the doubt and say he likes the idea of the Volcker Rule, but doesn't like the Dodd-Frank wrapping it came in. But why also strip away the government's resolution authority?
Asked for comment, Ryan spokesman Kevin Seifert told the Huffington Post in an email:
Congressman Ryan favors the repeal of Dodd-Frank, a misguided government overreach into the private sector that further enshrines the pernicious trend of crony capitalism. Of interest, Ryan has written about more sensible approaches to market-oriented reforms that address the core problems in the financial services sector. Ryan believes that real reform must be rooted in the principles of accountability, responsibility, and transparency that have made credit available to American families and entrepreneurs and made America’s capital markets the envy of the world.
In the RealClearPolitics piece Seifert references, written almost two years ago to the day, Ryan does seem to favor something like the Volcker Rule, praising a proposal by Boston University economist Laurence Kotlikoff that "calls for banks to stick to their fundamental purpose of financial intermediation rather than taking on the excessive risks with no strings attached that have lead to taxpayer-funded bailouts." Sounds kind of Volcker-y.
As for resolution authority, Ryan in the RealClearPolitics piece says he thinks giving the Federal Deposit Insurance Corporation the power to euthanize ginormous banks, as Dodd-Frank does, will give too much power to bureaucrats. Presumably the market will do a calm, efficient job of stripping dying banks clean and moving on, just like it did with Lehman Brothers. Oh, wait ...
In any event, the Volcker Rule as it currently stands is a hopelessly muddled and ineffective mess, thanks to the relentless work of the referees done by the financial industry, which also donates freely to Ryan and other members of both parties of Congress.