With the New Hampshire primaries almost upon him, the Republican contender who has staked his candidacy’s future on the outcome of the contest, Jon Huntsman, penned an op-ed for Fox News outlining his position on Too Big to Fail institutions. Like most of Huntsman’s policy proposals, this is actually novel and smart, but no one is paying attention because he almost certainly will not become the Republican candidate for the presidency.
What Huntsman outlines is an alternative to Dodd-Frank, which he believes would solve the issues inherent to the controversial regulatory reform law.
Huntsman believes, like many other do, that Too Big to Fail institutions still pose a threat to the American economy, and he does not believe that Dodd-Frank has truly addressed the problem. He points out that the six largest institutions are not only larger than they were before the collapse, but their net worth is staggeringly large: it’s equal to two-thirds of our GDP. It was only 20% of GDP in the 90’s, according to Huntsman.
Meanwhile, Huntsman argues, Dodd-Frank is making life more difficult for small banks by imposing “massive new regulations and unreasonable compliance costs on smaller banks, which hurts small business lending.” Those on the right like to blame new regulations for making smaller banks fail, but the fact of the matter is that community banks are more overextended in construction loans and mortgages than megabanks are, and that is what is causing so many to fail. So we must take this part of the argument with a grain of salt.
The Dodd-Frank alternative that Huntsman proposes would attempt to level the playing field for financial institutions by imposing fees on banks that grow above a certain percentage of GDP, “[providing] them an incentive to slim down and localize.” Not the typical free markets stuff you tend to hear from Republicans, especially Republicans seeking the White House, but Huntsman isn’t your typical Republican — he used to work for Obama, after all. And not only does he speak English fluently, he is also nearly fluent in Mandarin.
After vowing to break up the big banks, Huntsman makes an appeal to nostalgia for the community banks of days past. “Many of us can recall a time when we had community banks that were actually a part of the community, instead of a faceless Wall Street entity,” Huntsman writes. “Your small business or farm’s credit was based as much on your reputation and character as your FICO score.”
Appealing though that mays sound, what’s amusing about Huntsman’s proposal is that he pins the blame for Dodd-Frank’s inefficacy on the executive office, and not the Congress that passed it. Furthermore, it’s Huntsman’s own party’s anti-regulatory stranglehold on Congress that would make passing any new legislation that regulates any industry virtually impossible.
Huntsman is campaigning, of course, which necessitates posturing and promising the impossible. No matter how honest or dishonest he’s being with himself and his readers, he proposes an interesting alternative to our current regulatory framework, and a novel was of preventing banks from becoming too large. It’s way left of anything anyone with a chance at the Republican nomination would be willing to say, or even think. Too bad his campaign likely won’t last past Tuesday.
Read the full op-ed here.