To say the least, things aren’t going so hot for big banks in the nation’s capitol. Perhaps the industry will beat it all back, as some in it hope and critics expect. We doubt it, though, and it’s worth a moment to consider why the opprobrium heaped on big bankers is so virulent. One reason, we think, is that bank CEOs are following an all-too-well-trod path of listening only to those they like and employ. A look at some of the outsiders — Paul Volcker, Nicholas Brady and George Shultz for example – shows that not all industry critics are opponents. If bankers stay inside their comfort zone, they risk following Fannie and Freddie into ignominy. The GSEs were firms vaunted for their political prowess, but they failed to heed reasonable warnings of troubles to come, convinced that all who questioned had ulterior, unfortunate motives.

We know the comparison to the GSEs isn’t exactly flattering. Fannie Mae was said by some to be a fortress which no dissenting voice could breach. It certainly seemed so. We recall comments from its CEO, Frank Raines, that Fannie made about double the return of large mortgage banks because it was smarter than everyone else, discounting entirely the value of the implicit guarantee that of course gave the GSEs – unique in the financial system – funding rates close to the U.S. Treasury, and a whole bunch of other benefits beside. Mr. Raines also at about the same time said that he only wished every other financial firm matched his in risk-management acumen. These must have been comments cooked up by a crack team of PR advisers gathered around a nice board room inside the fortress, signaling as they do so profound a disconnect from external reality that no reasonable analyst could ever have contemplated them.

Is the disconnect between external reality and political representation similarly abysmal at the big banks? From time to time it is. A litany of recent statements from some big-bank potentates suggests that more than a few are talking to themselves and their friends on the upper East Side of Manhattan. It’s comfy, of course, but not conducive to objective analysis of the real challenges confronting the industry and the constructive – if sometimes costly – cures for them.