Memories (Casey Mulligan edition)

Remember this NYT op-ed by the University of Chicago's Casey Mulligan last October? Well, as bad as it was then, it's even worse now. (Keep in mind that this is a full professor of economics in the #1 ranked economics department in the country):

The non-financial sectors of our economy will not suffer much from even a prolonged banking crisis, because the general economic importance of banks has been highly exaggerated.
...
Although banks perform an essential economic function — bringing together investors and savers — they are not the only institutions that can do this. Pension funds, university endowments, venture capitalists and corporations all bring money to new investment projects without banks playing any essential role. [ed: Wow. Just wow. I didn't think it was possible to be a professional economist and also not understand a single thing about how a financial market works. Apparently I was wrong.]

What’s more, it’s not as if banking services are about to vanish. When a bank or a group of banks go under, the economywide demand for their services creates a strong profit motive for new banks to enter the marketplace and for existing banks to expand their operations. (Bank of America and J. P. Morgan Chase are already doing this.)
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And if it takes a while for banks and lenders to get up and running again, what’s the big deal? Saving and investment are themselves not essential to the economy in the short term. Businesses could postpone their investments for a few quarters with a fairly small effect on Americans’ living standards. How harmful would it be to wait nine more months for a new car or an addition to your house?

Ah, memories.