Streams

13 Bankers

Tuesday, March 30, 2010

Simon Johnson, professor at MIT’s Sloan School of Management and a senior fellow of the Peterson Institute for International Economics, gives an account of recent U.S. financial history and the showdowns between American democracy and Big Finance. In 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, written with James Kwak, he reveals why unregulated financial industry endangers our future. He proposes that the megabanks should be reconfigured to be "small enough to fail."

Simon Johnson's blog is The Baseline Scenario.

Guests:

Simon Johnson

Comments [21]

kai from NJ-NYC

@ ADA - Why, then, do you listen to this network? You have plenty of other networks to choose from that spout the delusional fantasies that you choose to occupy yourself with.

Go with those that would have you believe that the guest stated that the "solution" (sounds like you're craving authoritarianism here) "is more men with guns to order individuals around and tell them how and when they may or may not dispose of their own private property."

What you willingly ignore, or have no grasp of, is the fact that much of the financial havoc that has been wreaked on the global economy was done by bankers in a system that did NOT "own" their property (monetized funds) and instead placed over-leveraged (institutional) bets with other peoples' money.

"Basically," as you say, you're making stuff up...

Mar. 30 2010 04:52 PM
Eugenia Renskoff from Williamsburgh, Brooklyn

To Mozo: I agree. I don't want anybody to lose their home. It is a horrible experience. I know because I lost mine and am still underwater. All this talk about foreclosures brings it all back to me.It is sad to know that since my foreclosure in November 2005, nothing much has changed for the borrower/consumer. Let's hope that something does change soon. Eugenia Renskoff, www.beccar.wordpress.com

Mar. 30 2010 04:43 PM
ADA from NJ

So basically, the solution according to the guest, is more men with guns to order individuals around and tell them how and when they may or may not dispose of their own private property. In other words, more arbitrary authoritarian rule and greater demand for civil obedience under threats of fines and imprisonment.

Somehow the problem is always freedom and the solution is always coercion. No matter how much authoritarian and centralization planning there will be in the economy, the problem is always the tiny bit of freedom left.

Thank you for another wonderful insight into what is word with society. As if we don't hear it enough daily on this network.

Mar. 30 2010 03:10 PM
Dr. Goose from Glen Ridge, NJ

Mr. Geithner's Lingering Resentment:

"The stimulus had its effects,
And avoided some financial wrecks,
But while saving the banks,
Did I ever hear thanks
As they cashed in their big bonus checks?"

http://www.limericksecon.com

Mar. 30 2010 02:44 PM
kai from NJ-NYC

@ Jim - High finance, whether you like it or not, has little to do with "running a business," per se, because it is divorced from actual production or generation of goods and even services. That's probably one of the biggest problems with global capital today in the financial markets; that on some trades and exchanges, the only thing that is being provided is liquidity or fluidity. Not to say that such fluidity is not necessary to such complex systems, but it should not be the prime economic driver.

In the end, what Johnson has been doing for the past 20 years or so was, on the macro level, evaluate, plan, and pressure suspect economies around the world with the IMF (some would say with unfair neoliberal strictures). That's his "business." Why? Entrepreneurship or bust I guess?

Mar. 30 2010 02:10 PM
Renee Kertesz from S. Orange, New Jersey

Oh, No, please tell me that as I turned on my radio today I didn't hear someone comment on how much better telecommunications are today since AT&T was restructured!!!! Please tell me that my ears deceived me!
Perhaps the speaker was young! If so please listen! Ma Bell, as we affectionately and not so affectionately called her, provided seamless and nonconfusing service to all. Presently I have Verizon for local and AT&T for long distance and cell service. When I move or change anything it's a telecommunications nightmare. It used to take one phone call.
In addition, Ma Bell was a good employer. Once employed, you had a lifetime job, with training, promotions, benefits, i.e. a future.
Perhaps a few entrepreneurs made a little money, but on a whole the public lost!
Renee
South Orange, N.J.

Mar. 30 2010 12:57 PM
Jim

>>>> kbinps from park slope March 30, 2010 - 12:38PM

Jim asks what kind of business the professor has started. Running a business doesn't necessarily qualify you to design policy. Isn't that obvious by where the financial system has taken us. That's the whole point of Michael Lewis' new book. I'd rather put it in Joseph Steglitz' hands than Donald Trump"s.<<<

I asked because he is a professor of entrepreneurship at MIT. Normally the people who teach those classes are entrepreneurs or have started businesses or have worked in the VC area. I see nothing in his background that indicates such experience. Plus he has worked for the IMF which has a nasty reputation in the developing world.

Mar. 30 2010 12:45 PM
kbinps from park slope

Jim asks what kind of business the professor has started. Running a business doesn't necessarily qualify you to design policy. Isn't that obvious by where the financial system has taken us. That's the whole point of Michael Lewis' new book. I'd rather put it in Joseph Steglitz' hands than Donald Trump"s.

Mar. 30 2010 12:38 PM
angela from nyc

I've never heard a guest refer to his book so many times in one interview. He's got to get the plugging of his book under control. I will not buy this book.

Mar. 30 2010 12:33 PM
kbinps from park slope

Wow, I just listened to a piece on Brian Lehrer about how older job applicants deal with ageism in hiring and then Mr Pesca scoffs at the idea of bringing in Paul Volker saying "wow he's kinda old isn't he?" Rather callow.

Mar. 30 2010 12:33 PM
mozo from nyc

#9 Phil --

Do you think that any system will eventually fail by virtue of being too large or too complex, that there is a limit to size or scope of design in any system or process? Thanks, liked your comment and will check out your website.

Mar. 30 2010 12:33 PM
mozo from nyc

I would like to say that I don't want anyone to lose their home. This problem the banks, mortgage brokers and Wall Street brought on themselves.

Mar. 30 2010 12:27 PM
Phil Henshaw from ny ny

I'm a physicist, and study developmental processes in nature of all kinds, including many kinds of economies that grow by themselves.

Our particular design for growth is to take on ever bigger, more complex and faster changing tasks of remaking nature in our own image until we fail. That's hazardous enough, of course, but it's driven by a monetary system that continues to multiply pressure to take on those kinds of tasks, **even after we fail**... That's fatal.

It would be nice to have money produce an ever multiplying free lunch seems conceptually attractive, but there are complications. there's real systemic failure followed by grinding downward spirals as debt for the growth not achieved continues to multiply. If we could see it that simply, of course, we could fix it.

To actually fix it means finding the above aspects of the physical problem, in our cultural languages. That's more difficult. I do a lot of work on that though. www.synapse9.com

Mar. 30 2010 12:26 PM
mozo from nyc

The other problem is that many of these residential mortgages have been split up with several different holders. There have been several foreclosure proceedings in the US -- two in Chicago that I read of -- that were thrown out of court beacuse no one could properly identify all the mortgagees, thanks to securtization.

Mar. 30 2010 12:19 PM
John from Staten Island

How has the consolidation of these banking institutions benefited the customer/consumer or the local economy for that matter? We have less choice and we're not getting better interest rates on deposits. Employment in this section has been impacted dramatically in NYC. Manufacturers Hanover, Chemical Bank, Chase Manhattan, JPMorgan and Bear Stearns are all former NYC employers now configured in one company

Mar. 30 2010 12:18 PM
Eric from B'klyn

Are there any indications that Obama Adm is listening and going to respond? ie the plan to put the 'consumer protection' agency in the Fed

Mar. 30 2010 12:18 PM
Jim

Just curious. What businesses has Prof Johnson have you started and succeeded at?

Mar. 30 2010 12:16 PM
Jaime from Manhattan

We must regulate short term lending and the fabrication of wealth by banks. The reason we did not have run away inflation with the bailout was the Fed was simple placing in circulation money that was agreed to exist by the banks but was not actually printed by the treasury. The whole sub prime meltdown came about because these banks just did not know what to do with this fabricated wealth and reached further and further into the economy to get it off their books. Only the fed should have powers we have given private banks

Mar. 30 2010 12:11 PM
Hank

Didn't Mr. Johnson want bank nationalization. Hasn't Tim Geithner been vindicated with his stress tests on the banks? Didn't this lead to a cheaper price tag for the government for recapitalization of the banks? So were you wrong for cries of bank nationalization?

Mar. 30 2010 12:10 PM
Mike from Atlanta, GA

When I was in B-School, the big was was for bigger and better banks. The rational was they get economies of scale. They also spread their lending risk by lending in various parts of the nation, not just in a single state/region. Canada has adopted this stratgey and they only have a handful of banks, yet they are much more stable than American Banks. Why can't we adopt a Canadian regulation model whereas we can allow banks to grow but yet have proper regulation to so they won't fail.

Mar. 30 2010 12:03 PM
Gabrielle from brooklyn

Thanks for having Simon Johnson on your show. He's amazing. My question for him is, what are the obstacles to effective financial reform in the US? and, does it make sense for the Republicans to oppose a separate consumer protection agency in favor of putting it under the FED's jurisdiction?

Mar. 30 2010 06:33 AM

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