TEXT OF INTERVIEW
Scott Jagow: Have you ever seen the movie, "The Third Man?"
It's a 1949 film starring Orson Welles. There's a famous scene in it where Welles' character talks about the difference between Italy and Switzerland:
Orson Welles: In Italy, for 30 years out of the Borgues, they had warfare, terror, murder and bloodshed -- but they produced Michaelangelo, Leonardo Di Vinci, and the Renaissance. In Switzerland, they had brotherly love and they had 500 years of democracy and peace. And what did that produce? The cuckoo clock.
So, what comes out of the financial mess we're in now -- innovation or the cuckoo clock? Time to visit with our economics correspondent, Chris Farrell. Chris, has our history of boom and bust in this country also produced periods of innovation?
Chris Farrell: Yes! If we look at the dot-com boom and bust, I think I have a very strong story there. We created the Internet future incredibly fast. All this investment went into creating the Internet and building these telecommunications networks. And we tried all these business models, and some of them went under, but others like Amazon.com, they were incredibly. And then the Fed comes in, and you know, they kind of prevent a recession from becoming too bad, and so this is OK. This time around, it's a little bit of a . . . am I being too much of a pollyanna? Has something really changed here? Because the downside is so scary.
Jagow: Are you saying there's going to be some kind of financial innovation?
Farrell: Absolute. We have an innovative financial system. We don't want to crush that innovation. Because it's very easy to sort of say, oh you know, this innovation, it's very dangerous. Well, what about money market mutual funds? You know 25 years ago, money market mutual fund was an incredible innovation. What about equity index funds? Innovation in the financial sector has been important to our economic growth. It went out of control in recent years.
Jagow: But Chris, it seems that there is a distinct possibility that any benefit that could come out of this particular bubble might be crippled by the fact that the government is bailing everyone out.
Farrell: Yes. But I think the way to look at it is the entrepreneur. I've been talking to a lot of small business owners. And you know, we all applaud when they make money, but if their business fails, they lose their health insurance, you know, they're not going to be able to fund their pension, their out of work, they might even lose their home. They're at risk. We need to have the same system at work for the head of Bank of America, for the head of Wells Fargo, for the head of Goldman Sachs. Otherwise, we're going to have a system where I get the upside, and the taxpayer gets the downside.
Jagow: All right, Chris Farrell, our economics correspondent. Thanks.
Farrell: Thanks a lot.