Nobel laureate economist Joseph Stiglitz says that despite all the government intervention since the collapse of Lehman Brothers a year ago, the financial system is no safer. In fact, the opposite is true, he told Bloomberg. “In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz maintains. “The problems are worse than they were in 2007 before the crisis.” Other experts share the Columbia University economist’s concerns, including former Federal Reserve Chairman Paul Volcker and Bank of Israel Governor Stanley Fischer. They worry the government has not only sanctioned banks as too big to fail, but made them even bigger and riskier with taxpayer assistance. For example, a year after nearly collapsing, Bank of America has grown and Citigroup has barely shrunk, Bloomberg reports. “We aren’t doing anything significant so far, and the banks are pushing back,” Stiglitz said. Stiglitz called U.S. policy “an outrage,” given all the taxpayer money poured into banks. “The administration seems very reluctant to do what is necessary.” Former IMF chief economist Simon Johnson shares Stiglitz’ bleak view. What Wall Street has learned, Johnson told ABC News, "is they can sell their stock to the government at some relatively high price the next time there's a problem. ‘This is going to encourage more crazy irresponsible risk-taking. A big chunk of the financial system has become a giant casino that you really don't need for a productive, functioning economy."
Street Talk
Stiglitz: Financial Woes Worse than a Year Ago
Monday, September 14, 2009 10:32 AM
By: Dan Weil
Monday, 14 September 2009
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