Why it's the new 'Great Depression'

Allan Sloan is a senior editor-at-large at Fortune

TEXT OF INTERVIEW

Scott Jagow: The government stepped in to bail out Wall Street. Now, it's gonna try to exact a price for that. This morning, Treasury Secretary Henry Paulson will reveal a plan for a whole new layer of financial regulation. It's being called the biggest overhaul since the Great Depression.

What we know about the plan so far is that the Federal Reserve would have broad new powers.
The Fed could examine the books of any institution that might pose a threat to the stability of the financial system. Paulson's plan also calls for a new agency to oversee the nation's banks and credit unions. Some Democrats in Congress are also working on different plans for regulation.

Let's bring in Allan Sloan of Fortune Magazine. Allan has a special report in the new issue of the magazine calling for more regulation himself and explaining why in some ways, the government is acting like the Great Depression is upon us. Allan, why is that?

Allan Sloan: The Fed is definitely afraid of the possibility of worldwide financial meltdowns. There are certain eerie similarities between what's happening now and what happened in 1929. And Ben Bernanke, who's the head of the Fed, was an academic who for years studied the Great Depression. And, you know, I think somewhere in his neurons he's made a decision saying the names "Bernanke" and "Depression" will never be linked, and he's being extremely aggressive and doing what he can to deal with this.

Jagow: Well in this report, Allan, you say that you're more nervous about the world financial system than you've been in 40 years of covering business and markets. Briefly, can you tell me why?

Sloan: Because every time you look around, some new thing you've never heard of appears, which we're calling "whack-a-mole" problems -- you think you have one down, the others appear. These institutions, the big financial institutions worldwide, are so linked that if any one of them goes, it's incredible mess, it's very, very creepy. And as you know, I'm generally optimistic about life and I think we'll get through this, but you don't have to be Bernanke to be worried.

Jagow: Yeah, obviously, and a lot of people are worried. What is one to do?

Sloan: Well, what you're supposed to do is the thing we talk about all the time, which is live beneath your means. You gotta be calm, you gotta remember what it is you're trying to do, and you have to try very, very hard in this market not to be vulnerable.

Jagow: All right, Allan Sloan from Fortune Magazine. Thanks as always.

Sloan: You're welcome.

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