FCIC reports the financial crisis was ‘avoidable’
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JEREMY HOBSON: Democrats on The Financial Crisis Inquiry Commission says the crisis was avoidable. In a report being published today, they blame regulators, bankers, politicians, and credit rating agencies.
Let’s get reaction from Simon Johnson, former chief economist of the IMF. He’s with us this morning from the World Economic Forum in Davos, Switzerland. Good morning.
SIMON JOHNSON: How are you?
HOBSON: Great. So this report from the FCIC says the financial crisis was avoidable, no big surprise there. Is there anything that caught your eye in what you’ve seen so far?
JOHNSON: Not particularly. I think it’s a good report. It’s pretty balanced and it does say that the regulators were responsible. And of course I would add, they’ve not fixed the problem since then.
HOBSON: Alright, well this was supposed to by like the report — the official report that came after the Great Depression but a lot of people think that this report has come too late because financial reform already passed. What do you think?
JOHNSON: There’s a fantastic book on the Pecora hearings, the 1930 hearings, by Michael Perino “The Hellhound of Wall Street.” And he goes through, you see it was much more prosecutorial. There was much more revelation of sorted details then we’ve got this time around, and of course the legislation followed the Pecora hearings rather than preceding it as in this case. So I’m afraid we’re probably going to have to come back and do more reform again.
HOBSON: And Simon Johnson, finally, you’re in Davos, Switzerland. There was just a call there today for less regulation on financial firms. Is it just a parallel universe over there?
JOHNSON: Yes, I mean I knew it was a parallel universe, and I wanted to observe it, but I’m just shocked by the temerity of these bankers. Not only are the showing no remorse, they’re saying, “Oh, all that regulation you’ve infused or tried slightly to push on us is irrelevant or bad or dangerous and damaging and you should let us have our bucks now.” And the rest of the Davos elite seems to be buying into this. It’s quite extraordinary. And rather disturbing.
HOBSON: Simon Johnson, former Chief Economist at the IMF. Thanks so much for talking with us this morning.
JOHNSON: My pleasure.
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