Banks: Targets of Opportunity

Conservative economist Larry Kudlow claims that while bank-bashing didn't work for the Labor party in the recent UK elections, banks in the US should gear up for a round of groin-kicking from both sides of the US political spectrum as the US presidential election race heats up late this year and next. According to Kudlow, the intellectual dishonesty inherent in this tactic is apparent.

Few will admit it, but unaffordable, undocumented mortgage quotas came out of Washington, not Wall Street. And Fanny and Freddie enforced them. And while the Fed’s ultra-easy money destroyed the dollar, it also caused a bubble in home prices.

 

Yes, banks made risk-management mistakes. But when will the firing squads stop? You know, you can’t have a decent economy without banks.

 

But when will you ever hear a politician say that?

Let me guess.

 

[Sound of crickets chirping]

 

Kudlow lists the usual suspects: Lizzie Warren, Bernie ("The proletarians have nothing to lose but their chains") Sanders, and, lately, Hilarity Clinton, but also notes that Republicans are also jumping on the anti-bank bandwagon.

Of all people, former Florida governor Jeb Bush bashed banks while in New Hampshire.

But wait, didn’t Jeb’s brother preside over the big bank bailout? Oops.

 

Former Texas governor Rick Perry is slamming the banks. So is former HP CEO Carly Fiorina. She actually said, “I agree fully with Elizabeth Warren.”

As Kudlow responds: "Huh?"

 

What's next for Carly? Is she coming out as 1/32 Huron? Will she change her last name to "Simon" and make her campaign song "Nobody Does It Better?"

 

Kudlow thinks that there are valid reasons for a politician to defend banks.

Banks do make business loans, which have picked up quite a bit. They do provide mortgages, though the terms are more difficult. They do offer credit cards, decent ATM machines, car loans, farm loans, and student loans. Even though the Fed has decimated interest rates, they do allow large savings accounts. And they do, after all, connect savings with investment. (I think that was their original purpose.)

Kudlow would get rid of the Ex-Im bank, as well as the "conserved" Aunt Fannie and Uncle Freddie. He doesn't say how he'd finance the US residential mortgage market without Fannie and Freddie, and I'd like to hear his ideas on that issue, because right now, those two broke (yet cash-generating) behemoths are pretty much all there is in the secondary mortgage market in this country, at least for conventional loans.

 

But I digress.

 

While sarcastically claiming that he'd never defend banks, he ends with a warning to pols.

Sometimes British politics leads our politics. And if bank-bashing didn’t work in the U.K., maybe politicians here should let it go, and instead focus on pro-growth measures like flat-tax reform, free trade, deregulation, and sound money. Just for a moment, why not leave banks alone?

Because they're easy scapegoats, Larry. Like lawyers, everybody loves to hate them, and for the cynics we have in D.C., who value power over truth (even those--or, perhaps, especially those--who claim to speak truth to power), they are low-hanging fruit.