The far left, wild conspiracy crowd, Occupy Wall Street folks (the three of them remaining), and those who find Elizabeth Warren intelligent all should have a new best friend in Nomi Prins, whose new book, All the President’s Bankers, has put ink to page on the strangest narrative of the 20th century one will find anywhere: That rather than being a remarkable century of technological advances, growth of market capitalism, improvement in quality of human life, and expansion of overall wealth, the 20th century was actually one insidious global conspiracy between elite bankers (just a small cabal of them, mind you), and various powerful politicos (mainly Presidents). In fairness, the extreme leftist, Prins, is not so much launching a partisan attack as an ideological one. She is unable to hide the fact that she loathes free markets as much as she does powerful banking, and the book is a 425-page collection of conspiracy theories, wild accusations, and drama-laced inferences. She provides good historical anecdotes at times, and should be commended for various moments of intelligent critique (she lambasts the new Dodd-Frank, but mostly for the wrong reasons; she is ruthless to Robert Rubin; etc.). But the book does little to live up to the inexplicable hype that was initially given it.
One gets the impression reading her work that she does not so much possess a flawed economic worldview as she does fail to possess one at all. Her refusal to touch the greatest example of public-private malfeasance in human history (Fannie-Freddie) is quite telling: Prins is not concerned with government power run amok (indeed, she wants MORE government power over seemingly everything); and she certainly is not worried about monetary policy run amok (though she begrudges what she believes to be Greenspan, Bernanke, and Geithner’s contact with the banking community leadership, she doesn’t offer a word of indictment for the easy monetary policy of Greenspan’s 2000-2006 monetary policy); NO, what Prins begrudges is not big government or a big Fed, but rather big banks. And how does one prosecute a case against big banks when the legitimate arguments against them would take careful argumentation, logic, and critical analysis? Why, by poisoning the entire thing, of course, with inflammatory rhetoric and class warfare.
The idea that big banks do systemic damage when they lend money out (vs. borrowers doing systemic damage when they do not pay it back) is a popular enough idea that I can forgive Prins for repeating it on nearly every page of the book. Sometimes her logic runs away from her, and she says some things I am sure her editors regret. The major mistakes Prins makes are not uncommon enough to warrant any further consternation than her entire class of Warren-ites deserve. She painfully begrudges the idea that the top 1% have seen their wealth grow 98% over the last two decades while the bottom 20% have “only” seen their wealth grow 21%, a begrudgement that I assure you she did not run past those who have seen their wealth grow 21%. But besides random head nods to the income inequality fad, the real point of Prins book is to suggest that we have a permanent and insidious partnership in the deepest levels of American society between American banking and American government, and that it must stop.
What must stop, of course, is a government that is large enough and powerful enough that any kind of government doll and trough and Christmas tree even could exist … A credit-driven society where debt bubbles are allowed to form and then banks are blamed for their fallout (vs. the borrowers) is problematic on many levels. I see much wrong in the present system, as does Prins, but I see virtually nothing that Prins is suggesting serving as thoughtful solutions.
A financial system free of moral hazard is a possibility in our modern society. No free marketeer ought to desire a system where anyone is relieved of risk (or reward). An appreciation for what this type of system would mean to Main Street, and to the interest rate market, is a fundamental prerequisite to improving the present system. The glut of liquidity defining our modern financial system is a boon to big banks, and I for one would love to see the power that liquidity grants to financial institutions diminished. But until someone wants to address the source of that liquidity: A federal reserve tasked with financing a big government run amok, thoughtful writers like Prins and I will have to agree to disagree.