Michael Lewis wants to break up the big banks. So do a lot of other people.

February 4, 2013
Michael Lewis, Moneyball author and big-bank skeptic. (AP Photo/Ben Margot)
Michael Lewis, Moneyball author and big-bank skeptic. (AP Photo/Ben Margot)

Talk about burying the lede. In the final two paragraphs of his New Republic review of Greg Smith's "Why I Left Goldman Sachs," Lewis, the most celebrated financial reporter in the country, calls for breaking up the big banks:

If Goldman Sachs is going to change, it will be only if change is imposed upon it from the outside—either by the market's decision that it is no longer viable in its current form or by the government's decision that we can no longer afford it. There is a bizarre but lingering aroma in the air that the government is now seeking to prevent the free market from working its magic in the financial sector-another reason that the Dodd-Frank legislation is still being watered down, and argued over, and failing to meet its self-imposed deadlines for implementation. But the financial sector is already so gummed up by government subsidies that market forces no longer operate within it. Could Goldman Sachs fail, even if it tried? If someone invented a cheaper way to finance productive enterprise, would they stand a chance against the big guys?

Along with the other too-big-to-fail firms, Goldman needs to be busted up into smaller pieces. The ultimate goal should be to create institutions so dull and easy to understand that, when a young man who works for one of them walks into a publisher's office and offers to write up his experiences, the publisher looks at him blankly and asks, "Why would anyone want to read that?"

Lewis isn't alone. Sanford Weill, the former head of Citigroup, wants to break up big banks. So does former Morgan Stanley CEO Phil Purcell. And Richard Fisher, the head of the Dallas Federal Reserve. And Simon Johnson, the former top economist at the IMF. And Sheila Bair, former head of the Federal Deposit Insurance Corporation. And Thomas Hoenig, vice-chairman of the FDIC. And Mervyn King, governor of the Bank of England. And Joseph Stiglitz, the Nobel prize winning economist. And Alan Greenspan, the former chairman of the Federal Reserve. The list goes on.

In May 2010, the Senate voted on an amendment to Dodd-Frank that would've broken up the biggest banks. Thirty-three senators voted for it, including Richard Shelby, the top Republican on the Banking Committee.

Thirty-three votes in the Senate isn't 51 or even 60. Still, the idea that we should break up the banks is treated in the conversation as a much more fringe theory than it actually is.

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Brad Plumer | February 4, 2013