Bill Moyers takes on the Economic Crisis

This weekend PBS's Bill Moyer's Journal had a very interesting interview of Simon Johnson, former chief economist of the International Monetary Fund (IMF) and a professor at MIT Sloan School of Management, and Perino, professor of law at St. John's University and advisor to the Securities and Exchange Commission. The talk was focuses on the banking crisis. It begins...

Like thunderheads roiling on the horizon, the clamor has been building as more and more Americans want to know exactly what, and who, brought on the worst economic crisis since the great depression. What happened and how do we keep it from happening again?

Congress has finally acknowledged the outcry and is supporting some 21st century version of the "Pecora hearings."

"Pecora hearings?" That's right, as in Ferdinand Pecora, the savvy immigrant from Sicily who became a Manhattan prosecutor with a memory for facts and figures that proved the undoing of a Wall Street banking world gone berserk with greed and fraud.

In the early 1930's, during the Great Depression, and under threat of subpoena, one tycoon after another, including J.P. Morgan Jr., was hauled before the Senate Banking Committee and grilled by Pecora, the committee's chief counsel.

Go watch the interview.

I quite like Simon Johnson's viewpoint. Here is the bit where he is first given an opportunity to present his case against the banks (at time 10:00):

... these big finance houses and securities firms that merged with commercial banks, and vice versa, are incredibly powerful. And they have, you know, questionable practices in New York on and around Wall Street. They're also incredibly powerful in Washington. The strength of their connections possibly is even greater now than it was back in the early 1930's.

I think you see it everywhere. You see it this week, for example, in-- in these banks that receive massive amount of government assistance and I think a pretty good deal from Treasury pushing back against other Treasury initiatives, for example, to help consumers in changing the rules around mortgages and around credit cards.

And also with regard to Chrysler. So, the government has a broader set of public policy initiatives. One of them is: save the banks. Others are: help consumers and some auto companies. The banks are happy to take the money on pretty generous terms, and won't cooperate on the other aspects of public policy. That tells you how powerful they are and how much hubris they have in these kind of situations.

Go watch the interview.