Financial Reform 101

By PAUL KRUGMAN
NYT

Let’s face it: Financial reform is a hard issue to follow. It’s not like health reform, which was fairly straightforward once you cut through the nonsense. Reasonable people can and do disagree about exactly what we should do to avert another banking crisis.

So here’s a brief guide to the debate — and an explanation of my own position.

Leave on one side those who don’t really want any reform at all, a group that includes most Republican members of Congress. Whatever such people may say, they will always find reasons to say no to any actual proposal to rein in runaway bankers.

Even among those who really do want reform, however, there’s a major debate about what’s really essential. One side — exemplified by Paul Volcker, the redoubtable former Federal Reserve chairman — sees limiting the size and scope of the biggest banks as the core issue in reform. The other side — a group that includes yours truly — disagrees, and argues that the important thing is to regulate what banks do, not how big they get.

(More here.)