Governor Patterson, Appoint Elliot Spitzer to Replace Hillary Clinton

It does a number of good things, the first is that he would clearly be a placeholder, and so we can allow the voters select a replacement in a special election in 2010.

The second is that Elliot Spitzer really understands the current financial mess, and how the current prescription, which involves even more bank consolidation, is just plain wrong.

His point is that if financial institutions are too big to fail, they are too big not to be broken up:

Two responses are possible: One is to accept the need for gigantic financial institutions and the impossibility of failure—and hence the reality of explicit government guarantees, such as Fannie and Freddie now have—but then to regulate the entities so heavily that they essentially become extensions of the government. To do so could risk the nimbleness we want from economic actors.

The better policy is to return to an era of vibrant competition among multiple, smaller entities—none so essential to the entire structure that it is indispensable.