Some Progress on Financial Regulation, Perhaps

from Paul Krugman's blog

December 30, 2013

Bankers Beaten Back A Bit

Mike Konczal has some surprising news: Financial reform is getting
somewhere. We entered 2013 amid universal cynicism; the bankers had bought
Washington again, and any reforms would be purely cosmetic. We leave it
with significant progress. You can still argue that reform falls far short
of what should have happened, and won't do much to prevent future crises.
But relative to expectations, this is a happy story.

How did that happen? Partly, says Konczal, the London Whale disaster came
at the right time from the right place. There you had Jamie Dimon, the
smooth-talking head of JPMorgan Chase, telling everyone that Wall Street
had everything under control, and politicians shouldn't worry their pretty
little heads about it — and suddenly we learn that Dimon's own firm has
suffered huge losses in an out-of-control, inadequately monitored trading
operation. Perfect.

Meanwhile, Konczal says, a loose coalition of progressive think tanks,
reformist academics, and political figures — especially, but not only,
Elizabeth Warren — kept the pressure on. Mike portrays this as an
interesting combination of politically unrealistic demands that
nonetheless helped shape the conversation — notably Anat Admati's calls
for drastically higher capital requirements — and detailed, line by line
input on proposed regulations.

You should by no means imagine that Wall Street is on the run, or that the
cause of real reform is triumphant. But we have just seen that it is
indeed possible to be too cynical about the political process: sometimes
good ideas and good people manage to rack up a victory or two against the
big money.