Krugman, Roubini, Soros: How To Solve The Financial Crisis

The New York Review of Books:

Following are excerpts from a symposium on the economic crisis presented by The New York Review of Books and PEN World Voices at the Metropolitan Museum of Art on April 30. The participants were former senator Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, and Robin Wells, with Jeff Madrick as moderator.

Read the whole story: The New York Review of Books

Comments

[RoloTomassi]

I do believe that Bill Bradley's three-point summation is the best prescription going forward; too bad that so far the Obama administration is ignoring the obvious best path forward...

Or are they? Perhaps they have deeper insight--or pehaps they know that this ship is going down, and all actions to prevent it are no more than lip service to the notion of "we must do something"­....

Only time will tell, but if you read this article carefully it becomes clear that ideological divides remain, yet one factor unites these guys: fear that nothing we are doing will work, or that what would work will not be done.

[InLosAngeles]

The governments around the world had their opportunity,. Why did Obama choose to bailout/back the debt of the corporate private investors ( banks & brokers) over the homeowner? The govt could have stepped in and set the bid for every residential mortgage in the US when the markets failed. They should have bid 20-30 cents on the dollar. The govtshould have enforced the collateral requirements and if the banks & funds had to sell mortgage portfolios at a steep loss to raise cash, so be it. The world does not need Citibank. The govt then should have given the mortgage holders (you) 90-120 days to repurchase their mortgage. The govt then should have refinanced these through fannie/freddie. The govt could have purchased up to $15 trillion face of mortgages for $5 trillion (at 33 cents on dollar). The investors/­creators/m­arketers of these crazy subprime, pay option/ 0 doc. loans would have taken a huge loss. The ave mortgage principal balance would have dropped 2/3, and been sold by the govt back to you for 1/3 of your original amount. The original borrower of a 300k loan who's adjustable int rate just went to 8% (for example), would now have a new refinanced 108k loan @ 5% for the same property. Their payment would go from $2200 down to $580. That would have put an extra $19,400 into that consumers pocket to spend to help the economy or deposit into the banks to help recapitalize them.

[freerovingbovine]

You don't think this would have caused an immediate run on the banks?

[InLosAngeles]

No (and I'm speaking about North America right now). There may have been a shift of deposits into the 85% of banks that are in good shape, or into brokerage houses like fidelity. FDIC/SIPC would have acted like a brake to any massive run.

[freerovingbovine]

A good discussion, but there are other facets to this gem that were left out. No doubt the American people will rise the the challenge but it wont be easy.

I believe we need to boost production and reduce consumption to solve this problem. This can be done with a Universal Transaction tax with automatic proverty level prebates and rebates for costs of production, investment and charity.

If we tax consumption and stop taxing production, the trade deficit goes down first, then the savings rate goes up while revenue, proportional to lifestyle, pays off the national debt with no impact to the less well off.

Hard work and investment profits are rewarded while taxes extract the true cost of consumption under this plan. The tax base would be so broad that the rate would be too low to notice, while compliance is strictly voluntary and apply only to receive prebates or rebates.

If anyone is interested I can post the short list of key principles for your comments.

Thanks,
"We are free roving bovines, we hold are large heads high"

[verycold]

I read this last night and found it very interesting and worth the read. What really struck me is how even with the "experts" nobody really knows for sure what to do. It all depends...­..on so many variables. I thought everybody had some good points. However they clearly are taking different roads to Rome. The question is whether all roads to lead to Rome. What was particularly telling to me was the comment by Soros, that he takes advantage of economic bubbles. That is how he has become so rich. While he might like the bubbles to less frequent or perhaps less damaging, he likes them all the same and thinks they are here to stay. Bill Bradley, summed it well at the end. I felt from my POV that Niall Ferguson best represented the possible failures our current path may lead to. In the end, even Krugman, a staunch Obama supporter, admitted Niall's concerns were legitimate. Very good read. Pass it along to others to help people try to ferret out what is really going on.

[lvdragonlady]

Pass a law that the United States will NOT have ANY dealing with 'zombie' banks.
Foreign countries are buying up America and NOTHING good can come of this.

[ekoorb]

We can nationalize their U. S. assets after China has tired of financing our monumentally short-sighted trade deficits.

[EinChicago]

Ummm. The big national banks, such as Citi and BofA have pretty much proven their solvency. The zombie banks of concern are all regionals and community banks.

[joebaggadonuts]

I admit I skimmed it, but I did not see anything geared toward industrial policy, really. Shouldn't we be restarting the system with a different operating system instead of the same old WinDoz that caused the crash in the first place? Shouldn't we work toward something other than consumer driven stuff? Review this short video (20 minutes) and see if you don't think so too.

[sonofsamphm1c]

An industrial policy without consumer emphasis? What happens? Somebody pays workers to build something that is never consumed?

[northstar11]

""""""that decision not to regulate derivatives created the following sequence: you have mortgages; then a thousand mortgages are packaged and sold as a mortgage-backed security; a thousand mortgage-backed securities are packaged and sold as a collateral debt obligation [CDOs]; then a thousand collateral debt obligations are packaged and sold as a CDO squared; and insuring each one of those bundles are credit default swaps, which are a part of that $33 trillion. And our government deliberately decided not to regulate this chain of investment­s."""""""

when you start with a mortgage and re-package it over and over pyramid style ----are you not DOUBLE-TRIPLE -QUADRUPLE-- COUNTING the original debt obligation??????

[sonofsamphm1c]

No.

[Msnger]

A key shortcoming of today’s policies is the weak and timid dealing by governments with the major banks. Given the background and quality of their asset explosion during the past 7 years, we can safely assume that any bank of substance today that had to keep up with the industry trend in the heyday is in reality now broke. Nothing short of swift, decisive, and authoritative action can fix this.

read on..... www.eyeofthestormbook.com

[Msnger]

The all-pervasive adoption of Modern Finance within the financial sector has changed the financial industry profoundly. Today’s focus is primarily on derivatives, but more important is just how Modern Finance has changed the fundaments of risk management, the measurement and perception of risk, and business models applied within the financial industry.

Our commercial banks, the core businesses in our financial system and the wheel that makes the world go round, were led astray by Modern Finance. To date there has been little discussion of the practices of banks and the activities they have become involved in, most of which they are entirely unsuited for. banks left behind their legacy and experience in what can be termed “relationship banking” and entered the newer world of investment banking and asset management. In the three years prior to 2007, the 400 largest banks globally doubled their books to $55 trillion, more than total world GDP. But not only are banks ill qualified as investors, they also (along with most of the financial industry) erred in applying the concepts of Modern Finance in entirely inappropriate ways and spearheaded a mass dissociation from real economic risks.

[northstar11]

"""""""So the entire model of self-regulation and market discipline now has collapsed.­""""""NR

so policy makers thought it a good idea to get rid of regulation and discipline---just turn the kids loose in the candy store.

for the biblicals -they will remember the story of the garden of eden---- adam tried to self regulate but lacked disipline

didnt work out to good for him either.

[munki]

Hope they do know what they are saying... including global...

micro, macro, partial global to global...

qualifications please... traveled? lived? understand all languages and differences?

[BonfiyaBabylon]

The Federal Reserve needs to be audited. - see Bill HR 1207
They've stolen $18 Trillion Dollars from the USA in the past 7 months.

Also, how can you trust George Soros when he made his fortune through the Rothschild banking, in hedge funds? Come on. Check out his bio. All during the 1960's...h­edge funds for the big boys.

And ever since that phase in his early career, all he does is work every day is foreign policy tactics for the Rothschild's, fueling confrontations between countries and their govenments. Brokering deals for Israel's miliatry industrial complex, Helping the poor defenseless countries surrounding Russia with arms deals...he­llo?

There's a much bigger story to be told here....

What the heck is he doing striring up trouble everywhere?

[avocado]

a little paranoid, maybe?

[vippy]

Again, just follow the money behind the unrest in any country. Someone is keeping the mess going in Israel and Palestine. We found that out in Iraq and I have no clue why we are in Afghanistan. But congress came up with 108 billion dollars for those wars and then has the nerve to say social security and medicare is broke.

[Coyote777 7]

-Mogamboguru: "Mourning the fallen this day (Memorial Day) is of the same value as crying crocodiles' tears."

-VegasBabe: "COSIGN!"
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American LEFTIST values

[PhilipTaylor]

This is what happens when Wall Street developed methods to divorce investing from Risk, and invented whole new forms of "Manufactured Insider Trading" that guaranteed Hedge Fund WINS at the expense of the World Economy!

[Carolab]

This is what happens when private bankers control the system.

[Troubledwawa]

Excellent read with a point blank summary of what got us into this mess in the first place, by Bill Bradley at the end.

Until we start exporting more than what we import, not too much is going to change. I believe the last month we actually did that was April of 1976. Since then, we've been playing this game of we'll keep importing more, if you buy our bonds and fund the government.

And now from this article, the Chinese are starting to play hard ball now. They are no longer funding the debt, and expecting us to keep on purchasing their products with no devaluation to the dollar, while the yuan stays put.

Time to restructure the economy folks.