In a word, no.
Or, at least, not much. While it would be nice to believe that Larry Summers had to withdraw from the race to take over the Fed because of his substantial role in creating the global financial collapse, I think it had more to do with his outsized personality. Before you start celebrating his defeat remember that Goldman Sachs still must approve any choice and President Obama may yet choose one of its anointed candidates over Janet Yellin....
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions....
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis....
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy....
So what needs to be done?
Economonitor — Great Leap Forward
Five Years After Lehman’s: Did We Learn Anything?L. Randall Wray | Professor of Economics, UMKC
6 comments:
"Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform."
Wall Street was given more than just the TARP money? Isn't it against the law for the Fed to give people money without first receiving approval from Congress and the president?
Tyler,
the Fed did a bunch of short term financing operations acting as "lender of last resort" so they rolled over a bunch of short term funding for the Institutions...
I believe Wray adds up the sum of all of those operations to get to the 29T which is controversial (but looks like he is sticking to his guns on this one...)
Like what he is doing is taking 29 weeks of rolling over 1T and saying that is "29T"... when someone else might say they did a 1T operation over 29 interval weeks... whatever...
Point is it doesnt look like we learned anything so I agree with that main point of Wray's here..
rsp,
Wray explains the $29 trillion figure here:
http://www.levyinstitute.org/publications/?docid=1467
Do you have an uncle that funds your cash flow by rolling over huge loans for as long as it takes?
That's not capitalism. Those institutions were insolvent and got rescued by the Fed's extraordinary forbearance.
Its the "lender of last resort" function and thats what they are supposed to do Tom when institutions are hit with big redemptions...
They (Bernanke) didnt do it with Bear/Lehman and just let Lehman go BK when he could have just became 'lender of last resort' for them against qualified assets and a lot of chaos could have been avoided...
Bernanke failed to act in accordance with Fed responsibilities... he screwed up big time...
If there is one lesson they can learn is that they have to act in accordance with their legal responsibilities...
They ended up doing it anyway so if they just would have went in to Lehman at the right time (ie before the BK) then a lot probably could have been avoided.... they exacerbated the problems...
Now they continue to preach "fiscal discipline" to Congress and keep screwing up in this regard too...
They are horrible... rsp,
That's true to a degree. Matt, the Fed acted within its power. But Bill Black and Randy claim that the big banks were insolvent and if they were smaller would have been put into resolution as the law requires regulators to do. The regulators exercised "forbearance" toward the TBTF's only and let everyone else short of liquidity hang out to dry. This simply condoned and ultimately ratified blatantly illegal activity on the part of the big banks as not only TBTF but also TBTJ.
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