Two compelling stories from Simon Johnson in two days.
He says the Republicans eagerly await the next round of election money from Wall Street players ready to take revenge on politicians who have tried to reform them.
The administration prefers a bipartisan approach – avoiding confrontation on the true nature of “too big to fail” or even explaining how much worse our problems became during the Bush years – but that just can’t work when the other side refuses to cooperate. Given Republican relationships with big banks, there will be no serious attempt to cut financial institutions down to a size at which they could be allowed to fail – no meaningful version of the Volcker Rules will make it into law.
Goldman and the other big Wall Street firms have already won big on this round. They will plow even more money into defeating political candidates who have opposed them – for example, on credit card legislation. The Republicans see this coming and are rubbing their hands with glee.
- Simon Johnson, February 5, 2010
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Then he says the crisis in Europe will be too much for U.S. banks – credit will tighten, forget recovery.
As the international situation deteriorates – or even if it remains at this level of volatility – banks will hunker down and credit conditions will tighten around the US.
And if the European situation spins seriously out of control, as it may well do early next week, the likelihood of a double-dip recession (or significant slowdown in the second half of 2010) increases dramatically.
- Peter Boone and Simon Johnson February 6, 2010
