Simon Johnson: ‘We have done nothing that will prevent this from happening again’
I will continue to put up the most interesting videos from the INET Conference a week ago. Here’s one with Simon Johnson, the former Chief Economist of the IMF.
Here’s the question: Can sovereignty and effective international supervision be reconciled when it comes to complex large financial institutions? Simon Johnson lays out a compelling case that they cannot. As he has said time and again, there is no meaningful resolution authority capable of dealing with large complex cross-border institutions like Lehman Brothers. We either let them fail like Lehman or bail them out.
Meanwhile people like Tim Geithner are arguing that financial institutions should be allowed to get even bigger.
Video below.
Nothing has been done and will be neutered by any free market regulator anyway who does not believe in regulation. I see the reforms coming in Europe, though not immediately. The central banks are still too in awe of the universal banking model.
I see things happening this way. Right wing parties in northern Europe gain influence, and block further bailouts. Then the debtor countries end up defaulting. Huge losses flow back to the core nations and require bailouts by the same nations that blocked the bailouts. Ultimately someone will see that big banks with overseas entanglements are very bad for domestic tax payers and then the break ups begin. Europe will start with nationalising the big banks to break them up. They may create smaller more diversified and specailist banks. The US I think with its corrupt politics will rumble on till the next bailout causes riots on US streets at the further abandonment of main street by the big two parties.
Nothing has been done and will be neutered by any free market regulator anyway who does not believe in regulation. I see the reforms coming in Europe, though not immediately. The central banks are still too in awe of the universal banking model.
I see things happening this way. Right wing parties in northern Europe gain influence, and block further bailouts. Then the debtor countries end up defaulting. Huge losses flow back to the core nations and require bailouts by the same nations that blocked the bailouts. Ultimately someone will see that big banks with overseas entanglements are very bad for domestic tax payers and then the break ups begin. Europe will start with nationalising the big banks to break them up. They may create smaller more diversified and specailist banks. The US I think with its corrupt politics will rumble on till the next bailout causes riots on US streets at the further abandonment of main street by the big two parties.