Interview with Gerald Epstein about his book Busting the Bankers’ Club
Key Takeaways
- The “Bankers Club” (financial industry and supporters) has strengthened significantly since the Great Depression, making financial reform more difficult
- Obama’s post-2008 financial reforms were limited due to the unified front between finance and industry, unlike in the 1930s
- There’s been some resurgence of heterodox economic ideas, but mainstream economics still dominates academia
- Incremental reforms and building institutions between crises is key for enabling more radical change when opportunities arise
Topics
Strength of the Bankers Club
- Has strengthened substantially since Great Depression
- Recovered quickly after 2008 crisis (2-3 years) vs. decades after Great Depression
- Includes economists, lawyers, politicians, CEOs supporting financial industry interests
- Federal Reserve plays key role in unifying and organizing the Bankers Club
Obama-Era Financial Reforms
- Mass anger after 2008 crisis created pressure for reform
- But reforms were limited compared to 1930s New Deal regulations
- Key differences:
- Federal Reserve was disorganized/discredited in 1930s, but powerful in 2008
- Less division between finance and industry in 2008 vs. 1930s
- Obama administration less focused on restructuring finance
Social and Regulatory Capture
- Social capture: Desire to be part of powerful in-group influences professionals
- Regulatory capture: “Revolving door” between industry and regulatory agencies
- Cognitive capture: Mindset that deregulated finance creates efficiency/innovation
State of Economics Profession
- Some resurgence of heterodox ideas (e.g. industrial policy) in policy circles
- More heterodox economists in Biden administration
- But mainstream economics still dominates top universities and journals
- Mainstream co-opts some heterodox ideas without acknowledging roots
Public Banking Movement
- Promoting “banks without bankers” – mission-driven rather than profit-maximizing
- Challenges: Lack regulatory support/infrastructure available to big banks
- Need national framework to support public banks and put on equal footing
