Paul Krugman has a poorly argued column today setting up straw men to argue his case for regulation.

This is pretty egregious:

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.

Of course, that’s untrue. The “side” exemplified by Volcker wants not only to end too big to fail, but also to regulate what banks do. This is not complicated or obscure.

Since Krugman singles out Volcker, let’s look at the proposal so identified with the ex-Fed chairman that the president called it the Volcker Rule. What is it, besides limits on size?

The proposal, dubbed the “Volcker rule” after former Federal Reserve Chairman Paul Volcker, would have essentially prevented any commercial bank with federally insured deposits from owning a division that makes speculative bets with its own capital.

If that’s not regulating what banks do then I don’t know what is.

But Krugman, who has been defending the too-big-to-fail banks for a while now, isn’t done with the straw (emphasis mine):

The solution, say people like Mr. Volcker, is to break big financial institutions into units that aren’t too big to fail, making future bailouts unnecessary and restoring market discipline.

That’s just not true. Ending too big to fail is a component of the bid to try to end bailouts and reinstate real markets. No one on the anti-TBTF side (which you might have noticed includes me) thinks breaking up the banks is a silver bullet. Would “people like Mr. Volcker” include folks like Simon Johnson? Does Paul Krugman really think these people don’t believe in wholesale regulatory reform?

Want to know what these folks—the anti-TBTFers— really think? Go take a look at Barry Ritholtz’s ideas from last week, which include regulating derivatives, reforming the ratings agencies, regulating the shadow-banking system, limiting bank leverage, and reforming compensation. Oh yeah, and ending too big to fail.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.