This morning at the American Economic Association (AEA) meeting in Atlanta, I was on a panel, “Global Financial Crises: Past, Present, and Future,” with Allen Sinai (the organizer), Mike Intriligator, and Joe Stiglitz.
The Wall Street Journal’s RealTime ran a summary of my main points: growth in 2010 may be faster or slower – depending on how lucky we get- but, either way, the most serious problem we face is that 6 banks in the U.S. are now undeniably (in their own minds) Too Big To Fail.
Reckless and mismanaged risk-taking is the sure outcome. But don’t take my word for it – read Larry Summers’s 2000 Ely Lecture to the AEA. The best line is on p.13, “[I]t is certain that a healthy financial system cannot be built on the expectation of bailouts” (American Economic Review, vol. 90, no. 2; access through your library).
A number of participants asked for a copy of my slides – please use this version (in addition there was some other material that will appear shortly in 13 Bankers, so we’re not putting it on the web yet).
By Simon Johnson