Jon Huntsman has an odd op-ed on the theme “‘Too Big to Fail’ Is Simply Too Big”.
One would expect an op-ed on that theme to involve a proposal to take some of today’s banks and split them up or shrink them. Instead he says:
There is more than one fix. The best would be to eliminate Dodd-Frank’s backstop. Congress should explore reforms now being considered by the U.K. to make the unwinding of its biggest banks less risky for the broader economy. It could impose a fee on banks whose size exceeds a certain percentage of the GDP to cover the cost they would impose on taxpayers in a bailout, thus eliminating the implicit subsidy of their too-big-to-fail status. Congress could also implement tax reform that eliminates the deduction for interest payments that gives a preference to debt over equity, thus ending subsidies for excess leverage.
There are four ideas here. The first is to repeal Dodd-Frank’s proposed mechanism for resolution of large banks. The second is to do what Dodd-Frank’s proposed mechanism for resolution of large banks does. The third was proposed by the Obama administration and killed by the Senate and would only moderately discourage bank consolidation, not eliminate the need to do something when large financial institutions fail. The fourth is a good idea, but would penalize lenders of all sizes and has nothing to do with the ostensible topic at hand.
This is, I think, part of the problem with conservative discourse being so dominated by jeremiads against mythical Obama administration initiatives. What Huntsman wants to do, in essence, is repeal a made up provision of Dodd-Frank in order to replace it with what Dodd-Frank already does, add on something the administration already proposed adding on, and then do an unrelated tax reform. But he insists that he thinks Dodd-Frank is a “tragically” inappropriate response to the financial crisis. So am I supposed to think he wants to modify it in a minor way on the tax side, or that he wants to drastically alter this misguided legislation? There’s no way to infer from this op-ed what it is Huntsman is saying he wants to do, which is especially problematic because contrary to myth politicians rarely lie about which initiatives they’ll pursue in office. Paying attention to policy proposals is normally a great way to figure out what’s happening. But the proposals need to be grounded in some kind of reality-tracking account of what the status quo is.