One of my favorite financial writers is Allan Sloan. He authors a column for Fortune magazine and does occasional commentary on OPB’s Nightly Business Report. What makes him different from other prognosticators is his humor, which is more Puckish than cynical. “What fools these mortals be,”* he seems to say with a smile.
Recently, Sloan turned his impish eye on the financial meltdown that began in 2008 and the remedies Congress provided thereafter. These remedies are largely smoke and mirrors he would have us understand. The Volker Rule, for example, though well intended, won’t save us from future disasters. The bill is too complex, originally over 300 pages, and does little to restructure institutions that remain too big to fail. As for the touted reforms of the Dodd-Frank legislation, Sloan seems to write with glee that it took he about three seconds to see a giant loophole in the measure. To add further cheer, he remarks, “There will doubtless be dozens of other ways around the rules.” (“The Five Myths of the Great Financial Meltdown,” by Allan Sloan, Fortune, July 2012, pg. 38.)
After several years of messing about with the problem, Sloan suggests a simple remedy: that it’s time for us “to stop pointing fingers at one another, and to fix the excesses that almost sank us.” (Ibid pg. 39) The solution, he writes, lies in the “Hoenig Rule,” thoughts based on a paper by Tom Hoenig, former head of the Kansas City Federal Bank and current acting vice chair of the FDIC. The proposal breaks up banks by function, not size, a strategy Sloan thinks is brilliant. But being the Puck he is, he admits that applying this solution would require common sense. I can almost hear his sigh of resignation as he realizes common sense is the piece that is missing.
*Puck’s speech from A Midsummer Night’s Dream by William Shakespeare, III, ii, 110-115)
(Courtesy of blogs.orlandosentinel.com)