Paul Krugman Crosses the Line
By Gerald Epstein, Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. Originally published at Triple Crisis
In his recent New York Times opinion column, “Sanders Over the Edge” (4/8/16), economist Paul Krugman offers his readers a basketful of misinformation on important economic matters about which he should – and probably does – know better. The column contains a large number of snipes and a great deal of innuendo against Bernie Sanders and his supporters, but here I focus on his claims about “Too Big To Fail” (TBTF) banks, their role – non-role, according to Krugman – in the financial crisis, and Sanders’ understanding of the policy tools available to deal with them. Krugman’s claims about these issues are misleading, almost certainly wrong, and, in my view, call into question the credibility of his New York Times column as a source of economic information and analysis.
Krugman starts here:
“Bernie is becoming a Bernie Bro.” I’ll leave it to others to dissect this one. Moving on:
“Let me illustrate the point … by talking about bank reform.
“The easy slogan here is ‘Break up the big banks.’ It’s obvious why this slogan is appealing from a political point of view: Wall Street supplies an excellent cast of villains. But were big banks really at the heart of the financial crisis, and would breaking them up protect us from future crises? Many analysts concluded years ago that the answers to both questions were no.”
As you can see by following Krugman’s link here, this is not, what Krugman suggests it is: it is not a link to an article quoting multiple analysts presenting strong arguments with evidence that large banks were not responsible for the crisis. It is a link to an opinion piece by Paul Krugman himself. Period.
And, moreover, in this linked piece, Krugman is far more circumspect and uncertain of the answers than if implied in his statement “that many analysts concluded years ago.” So, who are these “many analysts”? On what basis did they reach their conclusions?
Certainly, we can find some analysts who argue (“conclude” is a word that suggests an answer based on a comprehensive analysis of the facts) that the financial crisis was the result of government mismanagement, or was simply a textbook example of a bank run and not due to the actions of large financial institutions per se, or were the result of the decisions of a bunch of sub-prime mortgage providers – like Angelo Mozilo Countrywide Financial that operated more or less independently, and were outside of strict government regulation, that is they were in the “shadows.”