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Tuesday, May 18, 2021

A high-profile Obama columnist: Wall Street can give money to Congress

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Mark Warren is an outlier in American politics, an Obama-backing columnist for a small, left-leaning U.S. newspaper that plumbs the complex issues of U.S. tax policy, drug policy and the ups and downs of Wall Street.

“It’s a place where people can write something that is in fact broadly comprehensible,” Mr. Warren said in an interview.

Mr. Warren wrote a column that appeared on Sept. 30 that will probably go down in history as the weirdest. (He’s easy to joke with — he coined the term “jerk chowderhead.”)

The column was, essentially, the numberless well-meant hope that U.S. bankers might go off the rails long enough to open their wallets to help restore some of the $1.9 trillion in new money that the government has been spending over the past year to prop up the U.S. economy, which has been growing at anemic levels for the past year.

But in this case, the industry had almost no money to give.

In the 21st century, the U.S. financial system has largely shifted from a pure business model to more a “regulatory asset management platform,” Mr. Warren wrote.

But while bankers (and brokerage houses and pensions) are paid big fees every time some corporation issues bonds or some corporation refinances its debt, there are little incentive to make loans and less incentive to use their vast fortunes to actually actually make loans.

“Corporate financials are taking far less risk than they did in the past,” Mr. Warren wrote. “As a result, banks have less risk-weighted assets and roughly 10 percent less profit on average.”

The $1.9 trillion that the government has spent on stabilizing the financial system was coming not only from government-funded loans but also from Congressional bailouts and the Federal Reserve’s balance sheet. (Bear Stearns and Lehman Brothers were both bought by the government.)

And while the fact that those bailouts came from taxpayers is an iconic political story of the past year, the fact that so little private capital has been deployed to help save the U.S. economy from a recession is arguably an equally iconic story of the past decade.

Wall Street could easily have put more money on the table for Congress to use as it wished: Mr. Warren wrote that investment bank Morgan Stanley made a $1.3 billion profit in the third quarter but it has paid out $4.6 billion in dividends and buybacks to shareholders so far this year, but it is sitting on $35 billion.

And with the foreclosure rate at record lows, fewer underwater mortgages and, increasingly, no need to worry about prop-up sales because prices are up, the economics of lending have changed.

Mr. Warren, a professor of journalism at the University of Maryland, looked to the British press to find stories that, while far from perfect, at least captured at least something that he could chew on.

(For what it’s worth, the U.K. media under the scandal-plagued former prime minister Tony Blair had a far better record than the U.S. press in checking some of the hair-splitting over one issue, precisely because they used a method of sharing key investigative stories that the American media has never completely adopted, and because of it, British papers tend to be more balanced in their coverage than American papers.)

In “The Bailout Crisis That Never Was,” Mick Malkin in the U.K.’s Sunday Times, reporting for The Daily Telegraph, wonders how it is that the government is spending billions on business loans while no one ever told him about a string of family-owned businesses that went bust.

But Mr. Warren is not off to a strong start, posting a headline from The Wall Street Journal about the famous “Masters of the Universe” that reads: “How My Masters of the Universe Broke My Heart.”

“We’re not just talking about people not paying their taxes,” Mr. Warren said, “but paying no taxes at all.”

Mr. Warren’s column did end with a hope.

“But it’s worth noting that America’s banking industry is still home to some of the best and brightest people on Earth,” he wrote. “They’ve just been caught in a web of regulations that do a dreadful job of identifying and solving business problems.”

“We may get to live happily ever after in a few years,” he added.

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