I’ve been catching up on some back issues, well I suppose they are posts, on Greg Mankiw’s blog. I ran across a link to this, Let’s Start Brand New Banks. It sounds pretty familiar to me. Although, it works from evidence instead of first principles, but I still feel justified. If only they would follow our advice.
He didn’t cite you. I’d be pissed.
Sounds good to me. So simple. Of course, the bad banks will lobby strongly against this.
The lobbing of the bad banks in this plan is where Chris Dodd, the senator who’s name is on the amendment that imposed pay caps for bank executives, turns out to be a genius. See:
http://online.wsj.com/article/SB123483031127995587.html
If we can convince the bad banks to give back the TARP money via awful pay cap regulation then we essentially take them out of the picture. Either by bankruptcy or irrelevancy. The general idea is that the pay cap regulation is so badly implemented that it causes the executives to rather go bankrupt than accept the limits. This is way extream, but that’s just how the article reads.
A bank that took a bailout and then gave it back over petty squabbling will hopefully have no lobbying power with the Obama administration with which to prevent the new bank plan. Since pay caps affect at most ~1% of the problem any discussion of them counts as petty squabbling. Also, getting that money back frees up even more money for the new banks.
Of course, if the new bank plan is not enacted, I’m pretty sure that the pay caps will turn out to be a horrible idea.