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August 2, 2012

NYT: Under Pressure, Biggest Banks Rely on 3 Myths

“The second myth is that a “cost-benefit analysis” would show that the Dodd-Frank financial reforms are not worth pursuing. This is actually a clever – or perhaps devious – legal strategy that is being pursued in a low-profile but effective manner. Even well-informed people in Washington frequently have no idea how much damage this myth can still cause within the rule-writing process.

Fortunately, Dennis Kelleher and his colleagues at Better Markets are fighting hard against this myth. In a report released this week, Mr. Kelleher, Stephen Hall and Katelynn Bradley point out that the industry never wants to take into account the real costs of the crisis – millions of jobs lost, growth derailed, lives disrupted and enormous damage to our public finances.

We had a frank discussion of this report at the Peter G. Peterson Institute for International Economics on Monday, and I was struck by how many people have a hard time getting their minds around the scale of the damage wrought by large financial institutions that got out of control.

This relates also to the third myth – the assertion that financial reform will hurt our growth prospects. Again, as laid bare by Better Markets, it was reckless risk-taking at the heart of our financial system that led to the largest crisis since the 1930s; the damage will be with us for a long time.

Some decisive government actions helped to reduce the impact on the real economy, and we avoided a second Great Depression.”

Read Simon Johnson’s full New York Times article here

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