Will banking reform hurt economic recovery? Banks (which don't like the idea of reform) would like you to believe that the economy will experience a setback if they're required to play by the rules.
Simon Johnson has this to say.
The international discussion among government officials regarding bank reform is, at an informal level, going better than you might think. Top people in the “official sector” are increasingly willing to confront the banking lobby and even refute its more egregious claims, particularly the completely erroneous notion that making banks safer – by requiring them to hold more capital – would actually hurt the broader economy and undermine growth.
Unfortunately, the structured intergovernmental process that actually changes the rules around banks – known as Basel III (or “Basel 3”) – was rushed to an unsatisfactory conclusion last weekend. The US and other countries with major financial centers will need to add substantial additional capital requirements at national levels if these new rules are to be at all effective.
The heart of the substantive discussion regards whether tightening “capital requirements” – the buffers against losses that banks are required to hold – will have a negative impact on the economy.
Now, as Johnson tells us, more and more people are convinced the banks are wrong. If what we want is a strong banking system that isn't going to crash again the day after tomorrow, we need to get tough on capital requirements.
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Are businesses really troubled by "uncertainty" and "big government interference"? Nope. That's cowcrappy, says Paul Krugman (not in those words).
If you ask businesses — as opposed to their lobbyists — what their problem is, you find no hint of the stories the usual suspects are telling you about government interference, political uncertainty, etc.. Businesses aren’t hiring because of poor sales, period, end of story.
And he posts a blazing, beautiful chart to prove his point. The right is handing us foisting off on us a bunch of lies. What else is new. Krugman concludes:
The best thing government could do to help business would be to spend more, increasing demand. The fact that it’s not going to happen doesn’t change the fact that it’s the simple truth.
If you look at the chart, it's interesting to note that "government requirements" (regulations, presumably) of businesses got more burdensome during the Reagan and Bush 1 administrations, stayed the same during the Clinton administration, decreased during Bush 2 and remain low.
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Ezra Klein shoots down another canard with help Kevin Drum and the Economic Policy Institute.
There seems to be a lot of jealousy toward public employees out there, most of it powered by an impression that public employees get more money for less work. ...The data (pdf) come from Rutgers's Jeffrey Keefe, and he also ran "a separate calculation that controls for full-time status, education level, years of experience, age, gender, race, employer organizational size, industry, and hours worked," which found that "public employees are compensated 2-7% less than equivalent private sector employees."
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The moral of these stories is, Just because you find economics and finance talk confusing, don't let conservatives fool you. Much of the cant coming now from the right is just that: cant. Not just won't but cant. Can't govern either. You'd think voters would have learned that by now.
