Goolsbee: Hurry the financial fixes

Alisa Roth Nov 13, 2009

Goolsbee: Hurry the financial fixes

Alisa Roth Nov 13, 2009


KAI RYSSDAL:Writing in the pages of the Washington Post this morning, JPMorgan Chase CEO Jamie Dimon said something interesting. Here’s the actual quote: “If some unforeseen circumstance should put this firm at risk of collapse, I believe we should be allowed to fail.” Now, bear in mind that Mr. Dimon’s speaking from a position of strength. His bank is one that actually came through the financial crisis better than it went in. But saying something should happen is one thing; making it happen’s another.

Austan Goolsbee, one of the president’s economic advisors, also weighed in on the subject of “too big to fail” today. He said we might be losing our big chance to change the way the financial system works.

Marketplace’s Alisa Roth reports.

Alisa Roth: In a speech today, Austan Goolsbee gave a shout out to his mother. He says we have to hurry up and fix the financial system while people like her — she’s a retiree in Abilene, Texas — still care about what’s happening. Otherwise…

Austan Goolsbee: We run the danger of this thing ending up back down in the subcommittee of whatever, of the banking something in Congress.

And he went on to say, we’ll just end up rewriting the same old rules we’ve had for years.

David Wyss is the chief economist at Standard & Poors. He’s afraid that’s where we’re already headed.

David Wyss: I think we haven’t learned the right lessons. Part of that’s politics. Nobody wants to give up sovereignty.

When he says sovereignty, he means who oversees what. But there’s another sovereignty issue: He says if we limit how big banks can get, we could end up short-changing them.

Wyss: Unless all the other countries in the world go along with it, you’re basically restricting American companies to being second-tier financial firms. If you only allow companies to grow to a certain size, if they get bigger than that, well, then they end up going overseas or someone overseas will eat their lunch on big deals.

But he says if we’re going to let companies get that big, then we have to make sure somebody’s watching them and watching them properly.

James Barth is senior fellow at the Milken Institute. He says we already have a system for that.

James Barth: It’s not so much that we need all sorts of new regulations, but rather we have to enforce existing regulations.

He says the system nearly fell apart, because the regulators didn’t do their jobs right. They should’ve realized that if people took out outrageous mortgages there would be problems when home prices fell.

Barth says the system isn’t perfect. For one thing, it needs to be streamlined.

But he and Wyss both say it’s impossible to stop bubbles from forming. The important thing is to be ready to clean up the mess when they pop.

In New York, I’m Alisa Roth for Marketplace.

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