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Says that -- banks are too big to fail.
Break come up -- come up and he should know Simon Johnson wears many hats he is the author.
Of the new book called thirteen bankers the Wall Street take over and the next financial meltdown yes you heard me correctly the next one.
He's the professor of entrepreneurship at MIT's Sloan school of management.
And a senior fellow with the Peterson Institute of International Economics in the former chief economist.
At the international monetary but I'm done with the -- Simon and I mean you can really accomplished here on many many levels but this new book thirteen bankers.
Talks about what you say is the next.
Time that we have to face this I was hoping we wouldn't see you next time.
I was hoping that -- and when the banking system broke down massively in September 2008 would have to be saved by the Bush Administration by the Obama administration.
They would fix it.
That's what you usually do in a crisis but they haven't fixed it all thirteen bankers who pulled into the White House in March 2009 but keep their jobs that bonuses that pensions all the key stop the board of directors -- to massive green light to go -- -- again.
Well the pace -- -- man and he says briefed at least some hot air down the necks of some people on Wall Street -- still taken TARP money but.
You say what we've got to do something different in the that is watch closely at any bank too big to fail needs to be broken up close to decide what's too big to fail and and two big that's like saying well GE or -- -- you know caterpillar you suddenly gotten too big is -- counterproductive to capitalism.
I think capitalism requires people fail if you have any any -- or any company any person who can't go bankrupt.
They know -- they gravitate massive risk and when things go bad.
Doesn't -- benefit society best of the big basket and terms of the size number CIT group failed last year they were screaming they weren't small business -- they need to -- -- -- -- eighty billion dollar bank they failed.
Who cares but I didn't have a big impact Goldman Sachs -- around 800 billion dollars in total assets.
I think the too big to fail basically to -- -- most of what in the credit market thinks that too because they'll go with -- can borrow eighty basis points cheaper than -- in the competition smaller banks because it is too big to fail so.
So let me read a quote from your book and let our viewers know what's behind your thinking here quote the conditions that created the financial crisis.
And global recession of 2007 to 2009 will bring about another crisis sooner or later like the last crisis.
The next one will cost millions of people to lose their jobs houses -- educational opportunities -- require large transfer of wealth from taxpayers to the financial sector.
And -- increase government debt requiring higher taxes in the future.
What is that going to be what -- -- it.
That's a great question but that's hard to know my bet right now is emerging markets everybody tells you China could only go up we know that all up big banks are taking money.
Warehouse in the money -- like out of China and other emerging markets and we lending it back out to some of those same places this is a rerun of the 1970s in some ways and the Petro dollars we re cycled.
To Latin America to Eastern Europe Poland and Romania what everybody said he's -- his country could only go up.
That ended in disaster 1982 I think will be run some version of this crisis again with emerging markets involved but without too big to fail banks involved lays it will be -- Problem for us but just for -- so you're saying that a lot of American financial institutions have been pouring money into China and that China is a potential bubble and what it pops.
We all could endure the same thing we've done before what is what can we do to stop that is it simply.
You Goldman Sachs or or would.
Whether it's BAC -- Wells Fargo or any of the big names JPMorgan Morgan Stanley how do you break up a company like that wouldn't she hears screaming.
From every free market here in America.
I'm pretty -- I'm -- locked out of restaurant ownership it is not a free market to have this massively unfair system.
Which some nice to -- huge subsidy from the government -- what we -- different used to complain loudly about Fannie Mae and Freddie Mac and they were right.
Those big -- -- against he's led to excessive risk taking Fannie Freddie fail to cost us a lot of money.
But well they now.
On the issue of of these massive banks that are getting that are -- they're actually more dangerous I was seen this cycle than even -- for you in the last cycle but let me get to the mechanics of it how do you break up into big then -- -- legally elected in 1994 has a cap on the size of banks took it out of staples retail.
Exactly and all the action since 1984 is not -- -- retail -- also financing we need to modify and update that make it a total banks nice cap.
And and -- it as a percent of GDP I would say roughly where would in the early 1990s thanks Lou -- global they were successful they helped -- non financial set to do really well in the early 1990s let's go back there.
What does it say that we've seen no change -- behavior on Wall Street because we haven't had any regulation passed that but there are about it's a terrible thing and at what happened was in March 2009 -- -- -- mistake they saved them.
Unconditionally -- come back in particularly with the regulation formed when they came up to fix -- the lobbyists we'll back will we're back in place a lot of money behind the new woman deputy Treasury Secretary said last week in a blistering speech actually.
The chamber of commerce now even he's upset he said you guys spending one point four million dollars a day.
Fighting finance reform we have 45 lobbyists per member of congress but -- too much is -- to stump but it's too like the cat the cat is out of the back.
While the lobbyists are Iran and so far congress has been basically doing nothing do you expect any kind of financial regulatory reform.
I think it it's very unlikely we'll get anything subtitle systemic risk getting the consumer protection -- may make sense may not -- with remains to be seen but into the too big to fail institutions.
If the White House really got behind and pushed -- now something could still happen Paul Volcker was talking to this just on Tuesday.
Another very powerful speech but seriously is -- -- struggling to Teddy Roosevelt ten years to break the power of the trust of the union between essentially the consensus the mainstream thinking has to change totally on this issue that's what -- will achieve its JPMorgan and and against on Iraq and that's within two now against.
Book is called thirteen bankers and Simon Johnson is the author of the book thank you so much for joining us and -- got to come back and talk about -- and the IMF bailout oh boy.
Thank you so much.
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