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Here’s a term you may remember from 2008: "too big to fail." It was the title of a best-selling book and an Emmy-nominated movie, and ultimately the foundation for a collective memory of a time when financial titans sent jobs, homes and taxpayer wealth into the economic afterlife.
It's the kind of cultural scar you don't just forget about. But it seems that Hillary Clinton's banking brain trust is trying to do just that -- and rewrite history in the process.
This week, Paul Krugman claimed that “too big to fail was at best marginal" to the crash of 2008. Earlier this month, the economist Austan Goolsbee said on Twitter that "BIG wasn't what made Bear or Lehman dangerous. it was the ability to spill damage onto others." Former Rep. Barney Frank (D-Mass.) even said Lehman was "very small" when it failed.
This has accompanied a broader barrage of Clinton rhetoric suggesting that Bernie Sanders' plan to break up big banks is a weak proposal that ignores her tough-as-nails shadow banking plan. Basically, the argument goes, "too big to fail" was never a serious problem, or at least the “big” part of it wasn’t really a problem, and anyhow, Lehman Brothers wasn’t very big.
The Clinton camp's “too big to fail” denialism runs against the official conclusion of the Financial Crisis Inquiry Commission, as well as the views of other top finance scholars. Sen. Elizabeth Warren (D-Mass.), former Federal Reserve Chairman Ben Bernanke, former IMF chief economist Simon Johnson, former Federal Deposit Insurance Corp. Chair Sheila Bair, former bank bailout Inspector General Neil Barofsky and FDIC Vice Chairman Thomas Hoenig have all maintained that "too big to fail" was, in fact, central to the crisis.
Every official who authorized the bailouts of 2008 and 2009 said they had no choice. They argued that letting big institutions fail would have ravaged the broader economy. The havoc that followed Lehman Brothers' 2008 bankruptcy demonstrates that this fear was legitimate.