March (Economic) Madness

Wednesday, March 04, 2009

Simon Johnson, former chief economist of the International Monetary Fund, professor at the MIT Sloan School of Management, senior fellow at the Peterson Institute for International Economics and co-founder of The Baseline Scenario blog, focuses on a different facet of the economic crisis each week in March. This week: bad banks and pension funds.


Simon Johnson

Comments [21]

george from Manhattan

The whole credit rating system is in my opinion the "house of cards" that this bubble was built on. Credit rating companies are full of it. The rules are vague and the average consumer has no clue how these numbers are derived. The scams to help people clean up credit ratings and improve credit support this. Mistakes on reports are rampant and yet the rating is both highly valued and almost completely ignored, until recently. The whole credit rating system is a joke. I couldn't even tell you if the major agencies are even using the same rules. Talk about "dont ask, dont tell".

Mar. 25 2009 11:40 AM
David from boston


In the next sessions with Simon, could you please ask about the shape of coming financial reform?

I'm not really upset with the former executives of CountryWide making more money by buying up toxic assets, in fact that's a great example of the market working to heal itself, and those guys are already rich beyond my imagination, so I don't really care, but I do care that we learn from this devastation and that it not happen again. A certain amount of competition is good, and in the future I want to be able to shop around for a competitive mortgage, so how can the financial industry be cleaned up while still allowing a reasonable amount of competition, and what are the politics of that endeavour?


Mar. 04 2009 02:39 PM

10, 16

problem and solution

Mar. 04 2009 12:12 PM
Justin D. Richardson from New Jersey

w/can we do? I think that it is very important and believe that there should be some intervention. "Jail Farms" ; "Work Projects" ; "Common Sharing" ; "School Credit" ; "Earth Priorities",.. I know we can do something and w/ if it can be done soon! Is overpopulation a con⋅sid⋅er⋅a⋅tion? You can check out the "Voluntary Human Extinction Movement"

Mar. 04 2009 11:36 AM
Unemployed Banking SECURITIZATION Systems Analyst from Long Island

oops, PROCESSES not processed

Mar. 04 2009 11:30 AM
Unemployed Banking SECURITIZATION Systems Analyst from Long Island

Commenter 13 first sentence sounds wacky but is totally accurate, while the unemployed securitization attorney who called in is missing the huge base of the iceberg for her small tip. It is the corporate culture of greed that has been more and more emboldened since Regan began deregulation that has permitted this entire mess. All work to meet banking regulations in securitization was simply a veneer. There was never a need for truth or substance in documenting books and processed because the regulators have been in the pockets of the banks and banking profits were all that mattered.

This needs to be fixed. Obama's ethic of transparency and truth along with strengthened and meaningful regulation could NOT be more applicable here.

Mar. 04 2009 11:28 AM
John Anderson from New York

Brian, you were careless in saying that Countrywide is profiting from the mortgage crisis (NYT article) when it actually was some former executives of Countrywide....scowl :-)

Mar. 04 2009 11:22 AM
adolfo vargas from nyc

very informative segment, thank you as always.

but above all i loved the music at the end of the segment. please please tell me who is that singing "me and my shadow"?! i would really like to get that version of that great song!!!
thank you.

Mar. 04 2009 11:10 AM
fuva from Harlem, NY

Your guest is not sufficiently outraged at the overdependence on fancy footwork financial institutions and the white collar sociopaths that run them.
Seems like more needs to be done to prevent foreclosures, so that the hundreds of trillions in credit default swaps that bet on mortgages defaults can't be cashed in, which would save the banks from having to dish that money out...

Mar. 04 2009 10:58 AM
Manny from Washington, DC

Hey can you guys talk about the attorneys, appraisers, and mortgage brokers at the local level that also allowed many, many bad loans to be entered into the system that then got securitized.

We need to make new laws to go after these slimeballs too.

Mar. 04 2009 10:57 AM

i'd be subsidizing citibank, blackstone, bush sr.'s carlyle group, etc. too if i had a bunch of angry oil billionaires after me...

Mar. 04 2009 10:57 AM
Josh from Brooklyn

Well, here's the problem. Nothing these banks did was illegal. The credit default swaps, letting banks do both commercial and investment banking (thereby if one part fails, the other screws us). We can thank Larry Summers for this. As Bill Clinton's chief he deregulated the banks. Before him, this would not have happened (at least to this level) because the banks couldn't engage in this risky behaviour. We'd know who owns whose mortgage. This is capitalism at its best. Why is the culprit trying to fix it? Having Larry Summers "saving" us is like dick Cheney responsible for closing Gitmo.

Mar. 04 2009 10:51 AM
oil monkey

I also wonder if your guest is familiar with Filipe Pace's recent editorial about the greater financial system, and what he thinks about it:

Mar. 04 2009 10:48 AM
oil monkey

Can your guest explain how this 'shadow banking' system IS NOT a means of shifting the risk the banks and the very wealthy might be exposed to in their drive to greater wealth onto the public and the less wealthy?

Mar. 04 2009 10:47 AM
last real republican

put another way --

i'm picturing madoff on his couch, watching the tv and slapping his forehead: "If i had just followed the law i could've doubled my take!"

Mar. 04 2009 10:45 AM
Bo from Brooklyn

Does Professor Johnson believe anyone should be prosecuted for any crime in connection with the bank failures or, in fact, the entire financial mess?

Mar. 04 2009 10:43 AM
Brett from Long Island City

Brian, your Shadow song (shadow bank, shadow bank) is making my morning!

Mar. 04 2009 10:43 AM
last real republican

shadow bank? more like shadow economy. citibank and friends make madoff look like a small fry.

Mar. 04 2009 10:42 AM
hjs from 11211

more evidence that the bush years were only about bottom to top wealth transfer.

Mar. 04 2009 10:33 AM
Susan from Kingston, New York

Brian, did you see the article in the New York Times this morning about Stanford L. Kurland, the former president of Countrywide. Apparently he has set up a new company which is buying up bad assets, probably ones that he helped to create at Countrywide. This is another example how these crooks continue to operate without being punished. I am outraged.

Mar. 04 2009 10:32 AM

why not let the banks fail and use the trillions to avoid public suffering (ie provide medical etc.)?

Isn't it cynical to assume, as paulson did when he initiated this strategy, that capitalism will/did fail?

Mar. 04 2009 10:11 AM

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