Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

[Chomsky]

Joseph Stiglitz, Simon Johnson, and Thomas Hoenig all testified before the Joint Economic Committee of the U.S. Senate today. The hearing is titled:

Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions


Here are their statements:

http://jec.senate.gov/index.cfm?Fuse...0-0ce56df64713

[Chomsky]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

I skimmed all three reports. To me, it was notable that all three who testified advocate letting banks fail, breaking up banks that are too-big-to-fail, and revising and re-instituting bank regulations.

[Chomsky]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

Here's a quick news summary of the hearing.

http://money.cnn.com/news/newsfeeds/...4_FORTUNE5.htm

[D-Mack]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

He argued that the U.S. financial sector is simply too large, and gigantic institutions are more likely to take excessive risks that backfire on taxpayers and distort markets. Stiglitz also criticized the Treasury Department's $700 billion financial-rescue program for propping up large firms with subsidies while allowing smaller, community-based banks to collapse.

"In short, our bailouts run the risk of transferring large amounts of money, often in non-transparent ways, to those banks that did the worse job in risk management - hardly principles on which normal market economics is based," said Stiglitz

Unfortunately it's the plan.....

[Jim Nickerson]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

Unfortunately it's the plan.....

Good work, Chomsky, putting this and the summary up.

The question is not what is the plan, but rather, whatever the plan will it ultimately work to the benefit of the economy?

I'm betting so far all this crap turns to real shit.

[flintlock]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

I'm betting so far all this crap turns to real shit.

Of course it will. And even if it didn't, do you think they will ever be able to turn off the money spigot once they are in the habit of spending it at this rate. "What's one or two trillion dollars in the big scheme of things?" will be the catch phrase on every evening news show.

[petertribo]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

"He argued that the U.S. financial sector is simply too large..."

What other sectors are "too large"? There are a lot of candidates.

I like Nassim Taleb on Bigness:

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

There a lot of Big lurking in America's Economy. So, "Big is Better." may have to go the way of Black-Scholes.

[Supercilious]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

Things that yesterday were labeled tinfoil hat material become public accepted knowledge as a result of undeniable evidence:

http://www.marketwatch.com/news/story/Even-Jack-Bauer-couldnt-stop/story.aspx?guid={BE0D1772-A628-454D-80BF-C4484CEBA7DF}

[we_are_toast]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

I guess the question I would have is, why did the committee hold these hearings and why did they invite these people to testify? By the time you get to a televised hearing, everyone knows pretty much what everyone is going to ask and say, especially from friendly witnesses.

So why would the Dems hold a hearing highlighting an economic approach which seems contrary to their own Presidents? I don't know, but this looks more like they're preparing the public for something.

[ax]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

I guess the question I would have is, why did the committee hold these hearings and why did they invite these people to testify? By the time you get to a televised hearing, everyone knows pretty much what everyone is going to ask and say, especially from friendly witnesses.

So why would the Dems hold a hearing highlighting an economic approach which seems contrary to their own Presidents? I don't know, but this looks more like they're preparing the public for something.

I think the better question is, and perhaps EJ could comment on this as he's spoken with members of Congress, is why weren't these guys (EJ and Taleb included), as economists who predicted this disaster, brought in after the Bear collapse? Instead, we're supposed to believe Summers and Geithner can fix things?

[ThePythonicCow]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

I guess the question I would have is, why did the committee hold these hearings and why did they invite these people to testify? By the time you get to a televised hearing, everyone knows pretty much what everyone is going to ask and say, especially from friendly witnesses.

So why would the Dems hold a hearing highlighting an economic approach which seems contrary to their own Presidents? I don't know, but this looks more like they're preparing the public for something.

Yes - it does seem that they are preparing us for the next round of disaster, panic and emergency "response."

Too many people with quite fine credentials (though not household names ... yet) are getting too much air time (and not just on Alex Jones) to point out the failings of the most recent emergency responses.

[we_are_toast]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

I couldn't help but notice that Simon Johnson also found yesterdays hearings somewhat curious.

Yesterday’s JEC Hearing on Too Big To Fail did not include any financial industry representatives. This surprised me - surely they want to go publich with their views on the future structure of the financial system? Obviously, they have great behind-the-doors access on Capitol Hill, but surely it is not in their interest to have right, left, and center piling on with regard to breaking up Big Finance? Yesterday, Thomas Hoenig, Joseph Stiglitz, and I were in complete agreement on this point, and my idea of using antitrust measures against major banks seemed to gain traction during and after the hearing.


Apparently, the committee invited a number of leading people from the industry (i.e., individuals who generally articulate the case for big banks) and they were all too busy to attend. This is a curious coincidence, because someone else - in an unrelated initiative - has been trying to set up a discussion involving me and people from the Financial Services Roundtable and/or the American Bankers Association, to be held at the National Press Club, but their calendars are completely full (i.e., there is literally no day that works for them, ever). ...

http://baselinescenario.com/2009/04/...ess/#more-3411

[Chomsky]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

It is curious. The Vice-Chair of the Joint Economic Committee is Charles Schumer (D-NY), among the biggest Wall Street whores in Congress. I say it's fat chance anything comes from this hearing in the short or medium terms. But at the very least, it is important to have the testimony of Johnson, Stiglitz, and Hoenig on the record.

[Rajiv]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

Simon Johnson now has a blog at the Washington Post

[Chomsky]

Re: Too Big to Save? Stiglitz, Johnson, and Hoenig at the JEC -- prepared statements

Simon Johnson now has a blog at the Washington Post

Indeed, and the latest post, a guest piece, is excellent.

http://voices.washingtonpost.com/hea...er_doesnt.html

The core of Geithner’s remarks focused on identifying the major challenges facing the financial system. Geithner’s concerns reveal that his focus is not on the health of the economy; not on inflation; not on the growing tax burden facing Americans; and certainly not on whether the government will be repaid the hundreds of billions of dollars it has transferred to the financial industry. Rather, the Treasury secretary’s principal concern was the fact that major financial institutions have reported unprecedented losses.

Further to the idea that the federal government is by the banks, of the banks and for the banks, and consistent with the government policy that no bank should be left behind, Geithner promised that, “We cannot allow doubts about the viability of major institutions to undermine the financial system as a whole. The U.S. government must continue those policies critical to sustaining confidence in the core of the system.” In other words, what’s good for America is bailing out the banks.

Geithner went on to say that regulators did not do enough to help the banks. I have no doubt that the government will do a lot more in the future.

Perhaps the most amusing part of Geithner’s testimony was his observation that “in early phases of the crisis, some financial institutions were able to raise significant amounts of private capital. But as the crisis deepened, this became impossible.” Geithner appears unable to comprehend the fact that the reason that private capital has dried up is because it has been supplanted – pushed out – by the government. As we have seen over and over again, no private sector financial institution will lend money when there is eminent risk that it likely will lose its investment entirely (or find its investment seriously diluted) by subsequent government interventions of precisely the kind we have observed in the U.S. lately.