Huntsman's Folly

Jon Huntsman is attacking Mitt Romney as someone incapable of reforming the US economic structure since, according to Huntsman, Romney is too close to Wall Street. Accordint to Huntsman, "“It becomes very difficult when you’ve taken tens of millions of dollars from the banking community, from Wall Street and for many, many years, to have a discussion that fundamentally alters their course. It can only be done, I would argue, by someone who isn’t a captive, a subsidiary of Wall Street.”

Huntsman is so far off base that his statement is ridiculous.

The truth is that only someone familiar with Wall Street and how it actually functions would be able to reform the market in a way that will benefit the country. Wall Street may be unpopular at the moment, but it is too important to the American economy for the someone with limited knowledge to mess it up. Just look at the Dodd - Frank law that Obama pushed through. That law was written and pushed through by folks who did not understand the problem and therefore were unable to cure it. For example, Dodd-Frank enshrined "too big to fail" in the American system. The biggest banks now get in essence a guarantee from the federal government that they will be bailed out in time of trouble. It was just such bailouts that the bill was supposed to end. Dodd-Frank also reduces the possible competition from smaller banks that could keep the bigger banks on their toes. First, Dodd-Frank places all sorts of new regulatory requirements on banks in a way that just raises the cost of doing business. This makes is much, much harder to start a new bank or even to continue to compete with a smaller institution. For example, financial institutions that do business with the federal government are now required by Dodd-Frank to maintain certain hiring percentages in their workforces for women, minorities and gays. The banks also have to keep offices and staffs to monitor these percentages. This just adds to the cost of doing business, something that a big bank can better absorb. Dodd-Frank also brought us the "reduction" in fees for the use of debit cards. All that did was force the banks to switch their fee structures so that costs were recovered elsewhere and the public got no benefit.

The real problem with the banking system that was supposed to be fixed was that to a great extent, the big banks were just too big to fail. The US needs either a plan to force the big banks to split up into smaller units that can compete with each other, or an industry funded system (like FDIC) which will provide a guarantee backup for shaky banks in order to protect customers without coddling the shareholders of the banks. We need to have those with accounts to trust in the security of their assets held in the system while not reducing the real cost of excessive risk taking for the bank management and ownership. Dodd-Frank did none of this. Only someone who understands Wall Street could actually accomplish this.

In other words, Jon Huntsman is totally wrong about Romney. Indeed, while Romney is not my favorite candidate, he is clearly the one who is best able to take on and reform Wall Street.