MacroScope

Massachusetts’ rookie Senator Elizabeth Warren was out making waves again at a Senate Banking Committee hearing on Capitol Hill today. The former Harvard law professor contrasted the legal code affecting drug prosecutions with what she depicted as cushy settlements for large Wall Street firms that committed egregious crimes.

Take Standard Chartered. They were fined $667 million by U.S. regulators for breaching sanctions related to Iran and three other countries. Yet the bank posted a tenth straight year of record profits.

If you’re caught with an ounce of cocaine, the chances are good you’re going to jail. But evidently, if you launder nearly a billion dollars for drug cartels and violate international sanctions, your company pays a fine and you go home and sleep in your own bed at night. I think that’s fundamentally wrong.

For an alternate reality where white collar criminals face the same legal system as drug dealers, see this episode of Chappelle’s show.

Regional Federal Reserve Bank presidents who oppose quantitative easing have made little way in convincing the central bank’s dovish core. Apparently, not so on the cause célèbre of policymakers like Richard Fisher at the Dallas Fed, who have called for too big to fail banks to be broken up.

In a speech this week, Fed board governor and regulation czar Daniel Tarullo stopped short of calling for outright break-ups. But he did take the unprecedented step of backing size limitations on banks that would be linked to overall U.S. economic output.

In his own words:

In these circumstances, however, with the potentially important consequences of such an upper bound and of the need to balance different interests and social goals, it would be most appropriate for Congress to legislate on the subject. If it chooses to do so, there would be merit in its adopting a simpler policy instrument, rather than relying on indirect, incomplete policy measures such as administrative calculation of potentially complex financial stability footprints.