FINANCIAL FIXES? MUDDLING IS MORE LIKELY

By Edwin Goodman

The panel appeared to be well received in that to my knowledge no one left the room during the hour and a half discussion and no one fell asleep. I started with a few overarching queries to the panelists; in due course, they fielded many questions from the audience.

These themes emerged. All the panelists, from political left to right, agreed that President Obama, faced with a dismal economic outlook at the time he assumed office, did a superb job in helping steer the U.S. and the world away from the cliff of economic chaos. That said, there were many quibbles about various aspects of his policy prescriptions.

Does avarice now command more tools to wreak havoc?

There was divided sentiment on whether the Wall Street community had reached a new level of avarice and obliviousness to the welfare of the community at large or whether men were as flawed as ever — no worse or better than a hundred years ago — but now commanding more technology and more tools with which to wreak havoc.

Susman argued that a misguided commitment to rampant free enterprise and new legal strictures had limited the reach of wronged plaintiffs and their advocates, thereby weakening another constraining force to prevent financial irregularities.

Weil felt it was ludicrous to try to identify (and blame) any one cause of the debacle because there were in fact multiple causes which coalesced into a perfect economic storm.

Can we delimit crises?

Professor Portes took the long historical view and pointed out that events of this ilk and dimension had occurred before and would again because man was imperfect and had constructed imperfect economic and governmental mechanisms that periodically fail.

Rosenkranz conceded that point, but along with Bob Bremner, felt that intelligent regulatory reform with adequate funding could eliminate or delimit future crises. However, the consensus was that in the current political climate it would be difficult to implement seemingly sensible steps.

Such steps might include:

  • The Volcker rule – limiting banks trading for their own respective accounts
  • Limiting balance sheet leverage for commercial and investment banks
  • Breaking up the too-big-to-fail financial institutions
  • Properly funding the SEC and other watchdog agencies
  • Regulating financial derivatives.

All felt that Dodd Frank was a well-intentioned but ineffectual legislative initiative, the shape and reach of which is still the subject of heated partisan debate.

Ultimately, I would summarize the sense of the panelists as “we can expect more difficult times but will probably muddle through.”

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1 comment to FINANCIAL FIXES? MUDDLING IS MORE LIKELY

  • Alberto Mestre

    I was very surprised, after just reading the highlights from your panel discussion on the Finacial Crisis that most of the attendees felt
    that Obama did a ” superb job in helping steer the US economy and the world away from the cliff of economic chaos ” Frankly, I couldn’t disagree more with this conclusion of the illustrious group.
    For the first two years of his term, Obama dedicated most of his energy and time to formulating and pushing Obama care which by itself presented all americans with many uncertainties as to future costs of healthcare and required government outlays to pay for 45 million persons that for the first time would enjoy health insurance. Those still unknown additional costs have been a drag in getting companies, small and large, to hire additional personnel even today. The 07-08 crisis has been the most profound one since The Great Depression and he did not dedicate himself, as he should have, to making it less painful.
    All estimates made by his team on when and how gowth would return have been proven wrong. Frankly, in my book, the term “superb job ” is completely inappropiate and undeserved.

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