Highlights of Stiglitz interview

Highlights from Joe Stiglitz’s Der Spiegel interview:

It’s going to be bad, very bad. We’re experiencing the worst downturn since the Great Depression, and we haven’t reached the bottom yet. I’m very pessimistic…

The banks that survived 80 years ago continued to lend money. Today many banks aren’t lending money anymore…

We’re just throwing money at [failed banks] and they pay billions of it out in bonuses and dividends. We taxpayers are being robbed for all intents and purposes in order to reduce the losses that some wealthy people bear. This has to be changed.

We have to reorganize our bailout system for the financial sector. For one thing, any bank that actually lends should get money from the government; more money to small and medium-size banks in smaller towns and less to Wall Street institutions. The government must also accept the consequences when banks become insolvent… [T]hese institutions have to be nationalized, which even Alan Greenspan is now demanding. Then the government can close those business segments that have nothing to do with lending and make sure that the banks no longer organize esoteric stock deals that they themselves do not understand…

The American government does talk a lot about stricter regulation of financial markets. I doubt that it’s serious, though. The Americans have always been masters at changing a supposed regulation measure into further deregulation… Even within [the Obama] administration, there are a lot of officials who are only for cosmetic corrections.

Posted by James on Monday, April 06, 2009