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Today's Top News
Lehman Collapse: 12 Months on and the Financial System Isn't Fixed, Warns Stiglitz
Mr Stiglitz, who is former chief economist at the World Bank, told Bloomberg News that "in the US and many other countries, the too-big-to-fail banks have become even bigger.
Joseph Stiglitz, 2001 Nobel Laureate in Economics, and President of the Commission on the Measurement of Economic Performance and Social Proges, arrives at the Elysee Palace in Paris September 14, 2009 for a meeting with France's President Nicolas Sarkozy and the Commission on a new method of measuring the economy and assessing well-being. (REUTERS/Philippe Wojazer) "The problems are worse than they were in 2007 before the crisis."
Mr Stiglitz joins the growing debate about how best to avoid a repeat of the worst financial crisis in decades without choking off growth in the financial services industry. His view has been echoed by former Federal Reserve chairman Paul Volcker, who has advised President Obama's administration to curb the size of the banks.
A year on from the demise of Lehman and the month of severe financial stress it triggered, there is little consensus among governments on how to reform the system. French President Nicolas Sarkozy has been most aggressive in his plans to target bankers' pay, but has failed to win the backing of the US.
Mr Stiglitz is today presenting a report to President Sarkozy on the lessons that need to be learned from the crisis. The leaders of the G20 countries meet in Pittsburgh on September 24 and September 25 and the reform of the world's financial system, along with the state of the global economy, will be top of their agenda.
"We aren't doing anything significant so far, and the banks are pushing back. The leaders of the G-20 will make some small steps forward, given the power of the banks" said Mr Stiglitz. "Any step forward is a move in the right direction."
Mr Stiglitz also played down the hope that the American economy still quickly resume its role as the engine of the world economy.
"We're going into an extended period of weak economy, of economic malaise. The US will grow but not enough to offset the increase in the population," he said.
"If workers do not have income, it's very hard to see how the US will generate the demand that the world economy needs."
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14 Comments so far
Show AllIt used to be a conspiracy theory....but now it has leaked out that the banks rule....
Follow the money... Where did it go?
Oh Well.....
I don't know...
Popular Mechanics has published a great article proving why banks are physically incapable of committing conspiracies.
DUH! This Congress and this Administration have done next to nothing about our financial system or our economy.
Don't say they haven't done anything. They've done plenty but for the goons on Wall Street. This warning signal looks like a very very bad omen for Congress next year. Even Larry Sabato (centerforpolitics.org) is unable to deny the reality that even the most well entrenched incumbents are in serious danger of losing their seats.
Here's another update from my governor's race in Virginia. My wife picked up two fliers in the mail from the GOP and one from the Democrats. From the GOP, one of them is about the transportation mess in Northern Virginia and Hampton Roads and another on education spending. On the latter, Deeds is already being put on the defensive. From the Democrats, another stupid flier on "abortion". For the first time, the Republicans haven't brought up a single social issue and have actually taken over the economic populism issues while the other side has nothing to offer but talk about women and soon to follow minorities. Deeds will pay the price for siding with Obama on mountaintop removal, not supporting single payer for the state, and just trying to run a lame centrist campaign. The GOP is getting very smart on where to target their votes by population densities.
I stand corrected! I should have said they have done nothing good. You are certainly right about the bad.
Excellent point about the "abortion" factor. The Dems seem to be fighting last years war. Republicans seem to be going on the points that interest Americans most. Will wonders never cease?
Too big to fail? Maybe, but not too big to break up into small pieces.
Dinosaurs, ENRON and Ma Bell were big. Where are they now?
The world seems to have taken a giant step towards widening the rich-poor gap. With the rich having perfected the tools of manipulating the economy towards perennial concentration of more & more wealth in fewer & fewer hands, there could come a day when trillionaires will coexist with farmer-suicide. Society needs to be woken up to the machinations of the compulsively greedy.
Before anyone gets too worked up, let me point out that the reforms made during the FDR administration required two terms to put in place. Anyone who thought everything would be fixed in just a year since the crisis started is getting a reality check.
It's also not true that nothing is happening. Congress is starting work on financial reforms including a financial version of the Consumer Products Safety Commission, which Wall Street hates, and Obama just spoke to a Wall Street audience which was glum instead of cheering at what he said. So let's hold off on the cynicism a little while longer.
Most important: Stiglitz reminded us that workers need income in order to buy what is produced. But the aim of the corporate world is profit. Profit is maximized by fighting unions and keeping wages in check. Thus inventories go unsold and recession/depression results.
This is offered as a simplified version of what we now experience.
WAL-MART & WAR "The American Way" What will we do when we can't even shop Walley World anymore? I suspect we will still have WARS!
From comments I have read, Lehman Brothers' collapse was engineered by then secretary of treasury Paul Watson - a former Goldman Sachs man. Get the picture? No Lehman, less competition.
When tens of millions are without jobs, there is no hope for recovery. I agree with the posters that say that people need to be able to buy things to have a healthy economy. Not frivolous over-marketed things, but basics.
How come there is no money to help save, re-vitalize or set up local enterprises to produce windmills and solar panels, or even for some non-toxic toys, clothing and household goods? How come there is no re-tooling of automobile plants to provide railroad cars? We could use all the money we now use for the military to chase down a dwindling supply of oil in the Middle East and South America to bring jobs and health care to our people.
When unemployment insurance runs out, savings run out and all the relatives have been tapped, the true human and economic toll of this "jobless recovery" will not be so easily ignored and glossed over.
Maybe then people will move to the left if there is an organizing focus such as a split by Progressives from the Dem. Party and a teaming up with the Working Families, Greens and other such to run someone like Sanders.
(If people catch on and start to move, watch for increased demonization of those I have just mentioned, as happened to Van Jones. Watch for publicity and magnification of every single error or fault of theirs, real or fabricated.)
If there is no move to the left, maybe there will be prolonged misery and a capture of the desperate people by demagogues and Elmer Gantrys and increase of the army as the employer of last resort.
Joe
Ahh, president Obama gave the bankers a stern warning not to engage in risky practices again. Yea, they are really scared!
Oh, they are revamping the "controls" over banks?
WINDOW DRESSING!
Buying up life insurance policies and packaging them for sale like they did home mortgages; sounds like they are really listening.
CORP IS BORG.
GREED IS THE CREED
DEBT IS THE NET.
EAT THE RICH.
Next time the system crashes, inject the trillions into the bottom of the system. Debt will be paid off, mortgages made whole, student loans paid, jobs created, cars bought, college tuition covered, health cared for, money saved, reserves maintained...as the money flows up the system to the usual suspects. Not just a free ride for the greed monkey banksters.
Too simple, too effective.