Alan Blinder: Why Serious Financial Reform Hasn't Happened Yet

wsj.com:

When economists first heard Gekko's now-famous dictum, "Greed is good," they thought it a crude expression of Adam Smith's "Invisible Hand" -- which is one of history's great ideas. But in Smith's vision, greed is socially beneficial only when properly harnessed and channeled. The necessary conditions include, among other things: appropriate incentives (for risk taking, etc.), effective competition, safeguards against exploitation of what economists call "asymmetric information" (as when a deceitful seller unloads junk on an unsuspecting buyer), regulators to enforce the rules and keep participants honest, and -- when relevant -- protection of taxpayers against pilferage or malfeasance by others. When these conditions fail to hold, greed is not good.

Read the whole story: wsj.com

Comments

[allincompassing]

06:52 PM on 01/25/2010

Our corporate Scions have been at the forefront of destroying our Country for years. The Pecora Commission 1932 stated this in cold hard facts, and Roosevelt was the only President that paid it any attention.

Ever since that time the only thing thats changed is the players. Every one of you should go to the link below and learn a little about the history of our great country. Don't believe me, read the facts and make up your own minds. If you aren't angry by the time your done, you'd better go straight to the hospital because your already dead!

http://mtwsfh.blogspot.com/

[Pippen]

07:39 AM on 01/14/2010

It's refreshing to read posts finally that understand the situation. The author of the article is clueless and the thread posts are focus firing on target. Thank you.

Your not cynical your righteous. And its time to Revolt. Peacefully of course. But without a revolt against big banks in our society and Campaign Finance Reform we're done as America.

VIVA LA LIBERTE !!!

Robber Barons and large Corporate now own and operate this countries government without a hint of "..We The People......." and make no apology as they rape our rights, our dignity and our justice. Are we Americans ? Or are we cattle ?

[yourmomscalling]

03:45 AM on 01/14/2010

ONE WORD

OBAMA

[BBinMT]

09:33 PM on 01/13/2010

Blinder never really gets to the real point, that polical candidates get elected with corporate money, lobbyists author legislation they want in their favor and get legislators to pass it. We have been sold a bill of goods on the perverted ideology of free market capitalism and globalism. They own the government and they will not and cannot, by their own definition, ever allow real reform, because it will eat into their obscenely huge profits.

[BabblingBrooks]

09:15 AM on 01/13/2010

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=517874

Clearly, politicians and bureaucrats are not the people to be running businesses. Or the government, it seems!

[stargazer13]

10:33 PM on 01/12/2010

Truth is a radical idea to an indoctrinated mind.

[Rule Of Law]

06:25 PM on 01/12/2010

""...and that much of "fancy finance" died a violent death in the marketplace. ""

I wondered how anyone could say this with a straight face given that the same Wall Street Vampire banks that took us to the edge with their derivative casino mentality are, right now, loading up on more of the same using the cheap FED money window to do it.

Then I read where this appeared--the Wall Street Journal--and who--Mr. Blinder, a professor of economics and public affairs at Princeton University and vice chairman of the Promontory Interfinancial Network, is a former vice chairman of the Federal Reserve Board--wrote it.

Gosh, WSJ, Princeton, The FED. Now I see how he doesn't get it.

[blueken]

04:08 PM on 01/12/2010

With 30% of the nation digging in thier heels on the right and 40% digging in thier hells on the left, you can't get a majority to agree on anything. This is what wedge politics leads to. Both sides are intractable and hate each other. The politics of division let's Washington rape the masses. To make matters worse, the middle has moved to the right, so there is no real difference.

[vippy]

07:34 PM on 01/12/2010

You are falling for the feud between the parties which is only a dog and pony show for us. Both parties have never done anything beneficial for the people, both parties are out for themselves,
stuffing their pockets. Both parties took a second and sanctioned the new funding for the wars.
Both parties within a second voted themselves another pay increase while cutting ours.
They agree on anything when it is something for them, they can't agree on anything when it is for us but yet they put on this show to extract more money from you and me.

[stargazer13]

10:37 PM on 01/12/2010

Thomas Jefferson also said the EFFECT of government coercion is:

"to make one half the people fools and the other half hypocrites, and to support roguery and error all over the earth"

Truth is a radical idea to an indoctrinated mind.

[stargazer13]

10:35 PM on 01/12/2010

"Facts are stubborn things; and whatever may be our wishes, our
inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence."
-John Adams

[blueken]

04:03 PM on 01/12/2010

Capitilisim in this country is like Girls Gone Wild. Without regulations the free market system is to capitalism what pornography is to love. I love the "asymmetric information". For those of you that don't speak "pedantic" that boils down to a loan officer or mortgage broker who knows you can't afford what he is about to sell you, but he also knows he will still get his commission and will be able to sell the mortgage to another sucker. He kicks the can down the road. Or maybe like a rateing agency that knows that a real estate bond ain't worth the paper it's printed on, but is more interested in collecting a fee than protecting a reputation. God bless America. I wonder if the money changers at the temple were tradeing in derivatives when JC went nuts on them?

[lvdragonlady]

02:53 PM on 01/12/2010

Simple answer to the question posed here .
Congress(both parties) are too busy lining their pockets with bribes from these businesses.

[TJCole]

04:36 PM on 01/12/2010

Exactly we're bribeocracy, a democracy no longer...

[outnow]

02:32 PM on 01/12/2010

Confusing financial incentives such as greed with an Ayn Rand theory is stupidity. Fire is very good too but it must be contained. Fire is neither good nor bad, depending, but greed leads to corruption and requires tranparency and effective regulation. Without that, greed creates a crime cabal. That's why we have laws and checks and balalces.

As soon as the banks figure out a way to buy the politicians, there is no democracy. Rather, hypocisy and crony capoitalism thrive off of predatory lending.

[booki]

02:30 PM on 01/12/2010

serious 'financial reform" has not happened , because your government has been sleeping with the banks.
the exact cause............of how and why everyone was so shocked.
on that warm evening, not that long ago......september 15, 2008.

and we were told , our financial system, was in shambles, and tomorrow....
we would crumble.

from that day on..............it has been the same joke.

[SuperBunny]

02:21 PM on 01/12/2010

It's kind of stunning that the author (who is a professor of economics and a former Vice Chair of the Fed) could get it so wrong.

His assertion that "much of "fancy finance" die.d a vioIent de.ath in the marketplace" is incorrect, according to the OCC's quarterly report. The nation's top five banks still maintain their stranglehold on the derivatives market, accounting for 97 percent of the $204.3 trillion traded in total volume last quarter.

Secondly, the Treasury's initial proposals for reform included giving more power to The Fed which means they could have bailed out banks in the future, without having to seek the approval of Congress. Thankfully, that proposal was ignored by Congress. And there's still no serious talk of separating commercial banking from the financial divisions in the too big to fail institutions.

[Rule Of Law]

06:18 PM on 01/12/2010

And those same banks continue to load up on derivatives with cheap FED money. With Geithner's promise (made on xmas eve! when we were all looking the other way) to provide Fannie and Freddy with "unlimited" funding to purchase mortgages now in play, the big banks hav eht perfect place to sell off this toxic k-rap, making us pay at both ends.

How insidiously clever is that?

[Canuckview]

01:56 PM on 01/12/2010

I wonder if the $40mil Obama took from the robber barons has anything to do with with the lack of real reforms?
http://www.opensecrets.org/industries/recips.php?ind=F&cycle=2008&recipdetail=A&mem=Y&sortorder=U

[outnow]

02:28 PM on 01/12/2010

The question is, "How much does it cost to buy the President's support of bankers?"

[DiogenesOfAlaska]

01:28 PM on 01/12/2010

I don't want to sound cynical, but how about the following:

forget financial reform. Just make sure that two or three extra parties emerge and wait until re-election.

The next financial disaster will be right there to serve as a guideline for voters.

Good luck.

But then again, there's always the alternative of making some senators feel some heat. For example, it is really easy to clarify to them that they are responsible for worldwide disaster if they act as stupidly as in the healthcare reform process. Who knows. Maybe that's enough.