Ten Years from the Bottom: Session 3: Social and Political Impact


– So Now we’re going to
hear about the social and political impact of
the financial crisis. To moderate this panel,
we are very fortunate to be joined by Mercy DeMenno, who is a principle at MBD Consulting, as well as a Senior Fellow at the Global Financial
Market Center here at Duke, so Mercy, thank you. (audience clapping) – Well thank you all for joining us. I’m really delighted to be here, and we have just a
fabulous set of panelists. So beginning to my left,
we have Lawrence Baxter. Lawrence is a distinguished
Professor of Law at Duke’s Law School, and
also the Faculty Director of Duke’s Global Financial Market Center, which of course, is
cosponsoring this event. Then we have Brad Miller. Brad Miller is Of Counsel at
Guttman, Buschner & Brooks, and a former member of U.S.
House of Representatives, where he represented the
great state of North Carolina. Then finally, we have Fritz Mayer. Fritz is a Distinguished
Professor of Public Policy and Duke Sanford School, where
he also directs the Center for Political Innovation,
Leadership and Service. Thank you all so much for joining us. To kick us off, I wanna
set the stage a bit by hearing about the panelists, both backgrounds, and
also their perspectives about some of the most salient social and political impacts of the crisis. So could each of you begin by telling us, in 2009, or thereabouts
what your role was, and from where you sat then, what did you think would
be the most lasting political or social impact of the crisis. Then tell us a bit more
about your current role, and from where you sit now, do you still think those
are the most lasting social or political impacts, or has
your thinking changed and why? So we’ll start with you. – Sure. I was still in Charlotte at the time. I was not long out of Wachovia, where I’d been on the business side, and rather complacent about
how the economy was going. There were lots of warnings. Emma talked about warnings. I think back on them now, and there were a lot of them, but I had the optimist’s bias. I assumed there was
always worry warts around, and that things would be okay. One of those warnnings came
from Robert Ruben, himself, at a fund raiser I went to, which he failed to observe either. When the crash happened,
it happened so quickly, especially for Wachovia,
which if you remember any of the details,
Wachovia ran into a massive very sudden liquidity crisis, and collapsed within about three days, was essentially bailed out by Wells Fargo. We were partly in shock, but I was tracking it all
the way through the night as the negotiations over whether Wachovia would go to CitiBank, or ultimately to Wells
Fargo were taking place. It was only slowly dawning on me just how massive this crisis was becoming. I’d greatly underestimated
it, and I was very angry. I thought that the immediate
consequence would be that there would be a lot of executives, and a lot of regulators in deep trouble. That’s the initial reaction. Where I am now, as I’ve been
teaching bank regulations and derivatives, and
financial crisis retrospect up here at Duke, which I had
been at many years before, and I’ve come to realize
a couple of things. One is the lasting
effects were much deeper, and different, from what I expected. This was typified by a remark of one of my very dear old colleagues, who is a professor emeritus
now, George Cristie. When I came back into Duke Law School, he came up to me and he said, Lawrence all my life, I’ve
never had to care about my back, and now that’s all I care about. What it brought home for
me was that this crisis had gone to the very heart
of the American Society, and probably the whole world, and that for that very reason, the causes and the fixes
have become much more complex than I ever imagined. I’ve said a couple of years ago, the longer I teach this,
the less I know about why this crisis happened. I think what we’re seeing,
and we’ll talk about this a lot later is that it’s gone
to the deep societal level, and being one of the series or shocks starting with 9/11, that have prized open very deep fishes in American culture. I can’t speak for abroad, but I do see some similarities there. We’ll talk about Brexit maybe a bit later. It’s also made it clear to me that there’s no such
thing as silver bullets. That there are some lessons,
but they’re very rare and far between. There are many more insights, which are different from
lessons, but for various reasons, one can see what caused what momentarily, but to understand it from
a systemic point of view is a much more complex situation. So that’s the part where I’ve felt like I’ve maybe acquired a
little bit of wisdom. – I was elected to Congress in 2002 from a district that includes
about half of Raleigh, and half of Greensboro,
in the area north of here, Roxboro, Yanceyville, places like that. I perceived myself to be, maybe I was a little to the left of your typical southern Democrats, but I thought of myself
as fairly moderate, so I wanted to avoid the committees that had hot political issues, like judiciary committee, and wanted something that was more kind of backwater technical issues, so I got on the Financial
Services Committee, which would never be at the
fault lines of American Society. I took the advice that to
be influential in Congress, although not particularly
visible to the public, pick some obscure technical issue, and become your party’s
expert on that issue. So the obscure issue I picked
was subprime mortgage lending. (audience laughing) I worked with folks here in Durham at what became Center
for Responsible Lending, to develop legislation
that was broadly based upon what North Carolina had enacted, and introduced that in March of 2004, but it had been in the works for sometime, so everyone knew that was coming, and that would be the
progressive alternative to what the industry was then pushing, which was really a very
weak set of reforms, that would have preemptive
effect on any state legislation. Those were the issues that I worked on. One of the early crisis books by Bethany McLean and Joe Nocera, was called All the Devils Are Here. A couple of the early
chapters were devoted to just how bad mortgage lending had become, and there was one sentence that said, they were proposing Congress to rein in subprime mortgage lending,
but nothing came of it. I thought, that’s five years of my life summarized in one sentence. Then in early 2007, Barney
Frank approached me on the floor and said, we’re gonna pass your predatory mortgage lending legislation, but there are millions
of families that are in these bad mortgages,
and they’re going to lose their homes to foreclosure
unless we do something. Come up with our menu. Come up with proposals, what we can do. So those were the two
issues I was involved in, which seemed to be the issues around which the nation’s economy, and a large percent of our nation’s society unraveled. I swear it wasn’t my fault. Then I was involved in, as a member of the Financial
Services Committee, on all the reforms, of Dodd-Frank, and all of those other issues. I’m something of a heretic. Sarah Bloom Raskin earlier
used the phrase, blame game, like it’s a bad thing, and
Tim Geithner reportedly said in private during the crisis, there were some critics
who would not be satisfied unless there was Old Testament justice. I think I’m really more of a
New Testament kind of a guy, but I wanted to turn some
people into pillars of salt. I think that there was bad conduct. This was not a perfect storm. There was blame worthy
conduct at the very least, pervasive blame worthy conduct. There was a great deal
of criminal conduct, and someone within may generally agree, I think Steve Schwartz, said he thought there were a lot of reasons
for the lack of prosecution, most of which wasn’t really
that much criminal conduct. I don’t agree. I think there was a lot
of criminal conduct, and as I said, there was certainly a lot of blame worthy conduct. I think there is a lingering anger among the American people
that everything done to respond to the financial crisis was to prop up Wall Street, not to help ordinary folks,
and the people who suffered, were relatively blameless, and the people who were most blame worthy suffered relatively little. In 1934, after two years of the New Deal, although Democrats had large majorities in the House, and the Senate, and in 1932, of course had
elected Franklin Roosevelt, there had been two back to back very strong Democratic years. Most political scientists
say that a real, real eye on American politics
takes three elections. One that kind of gets you in place, a supporting place to adopt its reforms, a second one that really
puts them in place, and then a third after those
reforms have been implemented, where the American people
pass judgment on it. In 1934 Democrats gained seats
in the House and the Senate, and cemented a realignment that
lasted for two generations. We had, had two good
elections in 2006, in 2008, in 2010, we got killed. I think we got killed
not because our policies were too ambitious, but
because they lacked ambition. Because they showed
neither the imagination or the urgency that was required, and we were punished for that. Democrats in the House
lost 63 seats, not mine, although 2010 was an
unpleasant year for me, but in the House and
Senate in North Carolina, Democrats lost control of both chambers. It turned out the Republicans did not really value my service, and they divided my District six ways. I decided that I just did
not want it that badly. In fact, I was kind of
disaffected at that point. I’ve remained active in
politics to some extent, mostly as a officious intermeddler, and I am now at a plaintiffs’ law firm, trying to bring about some of the justice I think didn’t happen earlier, a decade ago, when it
should have happened. – Great, so in 2008, ‘9, I was then as I am now, Professor at Duke, and I was teaching a course at that time called Globalization in Governance, and also directing a program in Geneva on Global Policy and Governance. So I was in Geneva a lot. In fact, in the summer of 2008, I’d been spending my summers taking notes of the Doha Round of the W to
the Multilateral Negotiations, because it surely was
going to be concluding, assuming there would be
a demand for the book about how the negotiations happened. It was, at that point in time, we were quite sure, and
the subtext of my course was all around how were we
gonna make globalization work? There were some tensions
yes, but by and large, the notion was that era of history was really very much in the
direction of the liberal order, that we were going to continue
to expand through trade, that notwithstanding some of the hiccups, we would figure out how
to make this system work. Really a kind of continuation
of the whole Anglo American, the old liberal order. By that, we also meant the
expansion of democracy. A real sense in which things were going. Now when the crisis hit,
I was blissfully ignorant of a lot of the details, but I think the first reaction
in talking with people, there was a sense that
we have a bit of crisis, but we’ll weather this, and
we will get back on track. Initially real concerns
about protectionism, in my weirds head, but it
turned out to be a little less than we feared, and the sense was we would weather this storm. At least for many of us, there was a sense that this was, well as you
saw in the film earlier this year, that we would manage this, and we would carry on. I’m writing a different book now, so I sit at Duke still. I direct a center on politics here, and have been thinking
a lot about the tenor of our politics in the United States and I could pick up on some of the themes that Brad just mentioned, but I’m also about to
leave Duke unfortunately, to be the Dean of the School
of International Affairs at the University of
Denver, the Korbel School, named for Madeleine Albright’s father. I’m now in the process of thinking about, what are the big issues in
the world that should be the centerpiece of this school, and how do we think more
strategically about them? In thinking about that,
and then thinking about this session, I realize
just how profound I think the impacts of this event were on our politics, and the
politics around the world. Hopefully we’ll talk about that in the course of this session, but I think it was in many ways, I don’t know if we can
call it a butterfly effect. It had profound implications. I know there’s been a lot of talk today, more from the inside,
but just on the ground and a lot of the things that
I think about and study, even though I didn’t
personally experience. I mean the depth of the
pain in this country and around the world was profound. The extent to which you can almost go to the point of saying, the social compacts seemed
to be broken in the country. The sense that if you
worked hard, saved money, bought a house, did
all those things right, you would be rewarded. The loss of wealth in the
middle class was profound. I know there was some
conversation this morning, the 800,000 mortgages foreclosed. The many people who came
close to foreclosure, the many other people who struggled, the unemployment, this
was a profound effect. I think it had multiple
effects in our politics, but I would say one of
the fundamental ones was a distrust of elites,
the rise of populism, a rise of a lot of different. You say in the forum obviously, the tea parties on the
form to some extent, to occupy Wall Street, but the tenor of our politics changed in this country. 2010 was a landslide. It’s easy to draw a direct line I think from 2008, ‘9, and in fact, and during recession,
and the politics of 2010, the redistricting that
followed thereafter. It’s not that hard to draw
a straight line to Trump. For that matter, today Trump and Bolsonaro are meeting in the White House, and around the world you
saw difference, variation, but Brexit, the fracturing, the loss of momentum of the EU experiment,
the loss of confidence in the Neoliberal Order, the sense that the world was coming to us. Freedom House does an
annual assessment of freedom around the world, and every
year since the Great Recession began, democracy has been
a retreat around the world. Now it’s too easy to lay
everything at the feet of the crisis, but it did put in motion, I think, absolutely profound
changes in the politics, in this country, and internationally. So we’ll talk more about
that, but I missed it in 2008 and ‘9, and in
hindsight now realize just how important an event this was. – You said 800,000, it was eight million that lost their homes to foreclosure. – [Fritz] Right, eight million sorry. – That’s bad. – [Fritz] That’s worse. – Yeah, that’s a bad number. (audience laughing) – [Fritz] I can still
do math, that’s good. – I think each of you brought
up this shifting trust in public institutions, the various types and how you saw that play
out over the last decade. Lawrence I was interested, you mentioned the shifting
trust or awareness of private institutions,
specifically people’s relationships with their bank. How do you think that the
role of finance in society from the broad public
perception has changed, and what do you think
the implications are, either for society or for
politics, more specifically? – Clearly, finance its
is evolving very rapidly and is much different now than
it was in the early 2000s, but I think what the
bigger change has been, a sensitivity and awareness of the part of members of society, to
the importance of finance to their lives, which has helped to fuel anger, because finance is very complicated. So people feel frustrated
that somebody up there on Wall Street, or somebody
in the bank down the street is screwing them. They don’t know why and they
are most of the time wrong. I actually share Steven Schwartz’s view that I think there was
very little criminality. I know that’s a very
controversial position to take, and disagree with Brad on that. I think it’s been much more
a case of people demanding punishment, and the pressure,
especially populist pressure on elected officials, has been to have them seem to
be acting some kind of either, not necessarily punitive,
but decisive way, at a time when they’re
not yet ready to act. Dodd-Frank was a heroic accomplishment, and I’d buy up to about 3/4 of Dodd-Frank. Remember it was passed under pressure about two years before the Financial Crisis Inquiry
Commission reported, so we didn’t even know what the Financial Crisis Inquiry
Commission had to take another two years to do,
and in that FCIC report, was itself fragmented by people who put my cards on the table. I’m a registered Democrat. But I respect the reviews
of the dissenting reporter, because they had a very
profoundly different understanding, and
vision of human behavior. So I think we’re in a very confused state in which the emotions are there, but the clarity on what
to do is not there, and I think that helps to account for what the big bank issue is gonna be a driving, significant political force in the next presidential
election, but for both sides. Why it was on the
Republican Party platform in the last one, even though
people on the other side, say far from you doing
something about the big banks, you made them stronger. It’s just a high level of confusion, because cause and effect is
very difficult to isolate in a complex system, which
is what our finance is. Maybe it was always complex,
not quite as complex as now, but we didn’t have to care about it much. Of course back to the
Great Depression we did. But even the dot-com boom and bust, I remember when that happened. I actually lost some money because I had a group of
researchers who kept telling me to buy stock in these dot-com companies, and I started to believe them. It was minor, it wasn’t
this massive eight million jobs lost kind of effect,
which has not been forgotten, and the lingering anger
about how it was dealt with has not been forgotten,
it was easily fanned as flames in political rallies,
and probably elsewhere, but certainly in the United States. – So Fritz, you touched a bit on how smug these sentiments, both as
sort of a shock of the crisis, and then followed by this
increased salients of the role of finance and of banks, began
to shape political identity. So talk a little bit more about that. – Well I think any time there’s a crisis, people are looking for
a simple explanation of why that’s happening. So inside we understand the
great complexity of this. We understand for example that it could have been much worse,
that Paulson was a hero. That’s not how it comes
across in the society. I think to the narrow question, bankers were a convenient villain. So what’s going wrong here. I think in the specific the bankers, but more generally they
contributed to a sense in which elites in the
country were somehow working against the
interests of the real people in this society, that the system was rigged, and I think there was a
fundamental break of trust in that regard, so to some
extent directed to banks. I think it spills out to
institutions like this. If you go to Kinston, North Carolina, it’s just a different attitude. There’s a wonderful book by Kathy Cramer on The Politics of Resentment,
Careful Conversations with People in Wisconsin. Similarly the books on the Tea Party, the extent to which people interpreted what was happening and
what had happened to them is them getting the
short end of the stick, where these other people,
these elites somehow seem to be doing fine. They bailed the banks out,
they took care of them, but they didn’t take care of me. So I think that this translated into a simple narrative. It’s a familiar narrative. It’s a populist narrative, in which the elites are not on your side. That is, and painted
with a very broad brush was the thing that Trump tapped into, and that in fact has been tapped into in many other places around the world. – So Brad you were talking a bit about the initial legislative
responses to the crisis, so bring us back to that moment, specifically with Dodd-Frank, what do you think that,
that process teaches us for the current state of affairs. Are there key shortcomings, or things that you think the
legislation did really well, and what do you attribute to those? – Oh, I do think there
were a lot of shortcomings in the response. We’re better off for Dodd-Frank. I think that the response
we could easily have had another Great Depression, which involved a much higher unemployment
rate, a much greater loss of value in the economy. It was worse, but we didn’t
follow what had been regarded as the standard play book for how to respond to financial crisis that went back to Bagehot’s
time in the late 19th century, which was when you have
a financial crisis, which happens with surprising frequency in developing and
developed countries alike, you ruthlessly sort
through which companies are illiquid, and which are insolvent, and they’re all gonna
say they’re illiquid, but that’s not true. Some of them were insolvent. Take the insolvent ones
through receivership. The illiquid ones you provide liquidity but on punitive terms so they will quickly get off the dole. We did the exact opposite, and the decisions
weren’t publicly debated. They were in fact not acknowledged, and by comparison in what we
did with the homeowners crisis, the foreclosure crisis,
although the full closure crisis in the Great Depression was less a part of the bigger problem, less of an overall problem
that it was in 2008, ‘9, and following that, that
was addressed with much more imagination and urgency in the
Homeowner’s Loan Corporation, and then following that
reforms in the crisis. The lack of trust is very
much a problem for democracy. There’s been a lot of discussion
of the changes of 13G. Is that right, 13G, or three? Anyway, the provision that allows the Fed a great deal of latitude
in responding to a crisis, and that was largely a
response to a lack of trust that the Fed looked to be an
opaque elitist organization, the two leading critics of, and I was not a particular
critic of the Fed, except for not adopting
consumer protections, which they had the legal authority to do. But the two leading critics in Congress were Alan Grayson, who
is about as far left as you could get, a friend of mine. As far left as you could get, and Ron Paul, who’s as
far right as you can get. The criticism of the Fed over time has come from the right and the left, and it’s conspiratorial. There’s a book that I haven’t
read by someone I don’t know, William Greider, but from the left, a book criticizing the Fed
called Secrets of the Temple. So obviously a sense that it is a conspiratorial sinister organization, and I think the reining
in of the Fed powers is a result of that,
and it may be a problem the next time we have a crisis. I think another very
important consequential effect is not just income and equality, and the resentments that come around that, but also the effect it’s had on race, on race relations in the United States. No communities suffered as badly as did the African American community, Latino community was close. African American
neighborhoods were targeted for the predatory lending. There was a distrust of
traditional banking institutions for understandable reasons,
because of the history. So when somebody showed
up and looked like them, and said they could get
them a good mortgage if they needed to refinance their house, so they could handle some
urgent need in their finances, they believed them, and they
got ’em a predatory mortgage. No neighborhoods suffered as greatly from the foreclosure crisis, as did African American neighborhoods. It was, and there have
been academic studies on how much loss of wealth there was for middle class African
American families. I mean it was an extinction event for the African American middle class, but the response on the other side. Believe me in October of 2009, all of America was mad with Wall Street, I mean across the board. Everybody was mad with Wall Street, and that had to be fuzzed up a little bit. A lot of you probably saw
the movie BlacKkKlansman. A lot of people liked it. I saw a lot of emails saying oh, that should have
gotten the Best Picture. I hated it, and the reason I hated it was it really created a class stereotype of who racists are in this country, and I’m sure the class stereotype is wide about who the people are who
were in the Ku Klux Klan. But the narrative, the
explanation for the crisis that it was because liberals pressed banks to make mortgages to people who shouldn’t have gotten mortgages. That was propaganda. It was not at all true. It was created from whole cloth after the crisis had hit, and it went right at that
racial divide in America, because you knew who
they were talking about, the people that liberals
made banks give loans to, that shouldn’t have gotten them. You knew who they were. You knew what they looked like. You knew where they lived, and that went right at the
racial divide in America. The folks who did that weren’t the kind of folks that you saw in BlacKkKlansman, those were folks who went to the best schools, belonged to the best clubs, work out with a personal trainer
three or four times a week, know exactly which fork to use, and when they needed to divide America, they went right to the
racial divide to do it. – So as you think a little
bit about that process, you’ve highlighted what you think are maybe some of the
underlying dimensions, that have led to the Dodd-Frank Act being suboptimal in some ways, so another thing that I think each of you has talked about in some context, is the role of the capture in some form, in the policy making process. Something that comes up a lot
in talking about Dodd-Frank in addition to these
deeper systemic issues, is whether there was a
failure of information, so was this a technocratic problem, and was there then an
opening for the cultural or epistemic capture, or was
it a lack of political will, or just an insurmountable
ideological flash that led to some of these shortcomings? – A Little of all of that, but the cultural capture,
and the regulatory capture, the cultural capture,
the capturing thought, was very real. Actually in dividing
the structure of CFPB, the Consumer Financial Protection Bureau, I had worked with a group of scholars, what most people call professors to provide an independent
source of information, and I went to a group
called the Tobin Project. A bankruptcy professor
at Harvard Law School introduced me to them. She is now in the Senate,
I think for President, and I approached them. Regulatory capture is
initially an idea of the right, by the way, but I approached
the Tobin Project, and they said, you know
there is no scholarship on regulatory capture at all. They were no help to me, but they published a volume of
essays on regulatory capture, so probably 10 people got credit towards their requirement to publish. I thought could you at
least have mentioned me in the preface or something, just having asked for this. Yeah, everybody wanted
to be held in high regard by all these sophisticated,
impressive people, and it was easy to be held in high regard. You just sort of puffed yourself up and you repeated what it is that whatever the talking point was. Washington really cannot distinguish between gravitas and pomposity. So there are plenty of people who were thought to have gravitas, who just said with great solemnity what it is that they were supposed to say. As a result there was very
little independent thinking. The folks who were on the other side were professors with beards. – [Fritz] Be careful now. – Who takes them seriously? (audience laughing) And that was part of the problem. Now I think since then,
and they’re broad parts. I mean nobody, there
was a set of advocates on consumer protection,
so I could deal with them. I was dealing with folks
on foreclosure crisis, and I had to deal with that, but nobody knew anything
about derivatives, nobody knew anything about shadow baking. Nobody knew anything
about the repo market, which really did what
precipitated that worst stage in I guess October of 2008,
was the run on the repo market, because Lehman was borrowing
$200 billion a night in overnight lending, which creates a real maturity mismatch, when they’re reducing that
make 30 year mortgages. Nobody knew diddly about
any of those things. There were no sources of
information available. I think there are more now, and I don’t know if in
10 years, or 15 years, those sources will still
be readily available. – That’s interesting you say that. I can’t speak to the specifics of this, but I have worked in the government, and worked for several
members of Congress. So going back to some of
our earlier conversations this morning about ultimately
these are human beings making decisions under
imperfect information. From the outside it’s easy to imagine that there’s some kind of conspiracy, or there’s malfeasance. My impression is most often, and I think what you’re
saying along these lines is, we haven’t been there before, and stuff is coming at you really fast, and people, members of
Congress are not well equipped to handle this. For that matter, their
staffs were not well equipped to handle this. Even in the inside of these institutions, this is new territory, and so this was. I don’t know what level of criminality there was in all of this, but I do know that in these moments
when you’re trying to deal with these kinds of issues, it’s very hard to have a real perspective
on it in real time as stuff is coming at you. Anyway, what you say resonates with me, and another thing I can say, is when I did work in the government, the last person I wanted to see were any of my colleagues at Duke, ’cause they really didn’t
know what was going on either, so I can understand that perspective. I could tell my Matt Taibbi story. I was interviewed for an
article about Matt Taibbi on the response of financial crisis, and on financial legislation. The article quoted an unnamed Democrat on the Financial Services
Committee who said, laughingly, that when the financial crisis hit, he had sat on his home
computer reading Wikipedia about credit-default swaps. That was me, and I think
Matt Taibbi did not identify that Congressman by name, because he assumed that
nobody would want to be seen as such a fool. I think by the time I finished reading the Wikipedia article, I knew more about credit-default swaps
that anybody in Congress. – So we all have a
homework assignment now. We all have a homework assignment now. So speaking of this sort
of imperfect information, one of the things we’ve talked about a bit in each of your remarks is the role that people’s perceptions of the crisis, and the responses to the crisis played in various election cycles. We talked a little bit
about 2008 and 2010, Lawrence and other’s, I’d be
curious to know your thoughts about the role you think the crisis, or the legacy of the
crisis played in 2016, and then the role that
you think it will play, or is beginning to play in the 2020 cycle? – It’s certainly playing a role to the extent that I think it continues half remembered and half understood events continue to fuel the vehicle
of financial collapse as a means of obtaining
votes on either side. Why I don’t think we’ve
gotten any more sophisticated about it is a much
deeper problem than that, is you’re probably all
familiar with Carlyle’s description of economics
as a dismal science. I believe it’s still is is,
but for very different reasons, and for reasons that are not
due to any any inattentiveness or sloppiness on the part of economists. It is because even if you
take behavioral economics into account as Emma showed us, that really is a big advance. We were not paying
attention to that earlier. You were still making
assumptions about human behavior that will take decades to verify if they ever could,
especially under pressure. So we now have data studies coming out that are trying to
model certain situations and using data analysis to predict what the outcomes will be. We’ve gotten a lot better than that, but when there is a crisis, that behavior is highly unpredictable, because we have something
like 90 in uncertainty, which is sometimes you just don’t know what the outcome’s going to be, and humans will behave differently. For example, to this day the
CFPB is highly controversial, and if you read both sides of it, just to simplify, you will
have one side supporting it saying that people should
be protected from abuse. Look at the hundreds of pages you get, when you go and get them notarized
for a mortgage and so on. How can you possibly
expect people to understand all of those? The other side says, you
shouldn’t take a loan unless you really understand what you’re letting yourself in for. Well the paternalistic view
says, that’s unrealistic. You can’t expect people to do that, and so we will protect them from it, but the other view will say
if you keep protecting people they will never learn. Now those views are very sincerely held. I happen to have the former view. I don’t think it’s realistic
to get people to that level, but the people who take the view that people shouldn’t borrow funds when they don’t fully
understand the terms, I don’t think they’re unreasonable. I think they are making a
perfectly reasonable assumption about human behavior, about moral hazard, about incentives and so on. Until we have some way of saying, this is what human behavior will be in that circumstance, I
think we will always get the sloppiness and it
will always be exploited, especially in election cycles, because it massages the
ideological differences between us, and the very same story can make people on the right believe they have been validated,
and people on the left believe they have been validated, and I don’t see that we’ve
made a lot of progress in eliminating that
fundamental uncertainty. – 2016. I can’t imagine that if our
democracy was working correctly that we would ever have
elected Donald Trump President. That just should tell us that
things have come unstuck. But I thought things had
come unstuck before that. Bernie Sanders began his
campaign with the assumption, I think including by Bernie, that he would be a message candidate. That he we be the Dennis Kucinich of 2016, and I say that with no
disrespect to Dennis, but Dennis was a message candidate who never cracked above about 5%, and Bernie damned near won. He got 47% of pledged
delegates saying essentially the same thing he’d said the whole time that I’d ever known him. I mean one of the advantages of Bernie, is that he does seem authentic because he’s been saying the same thing. He’s been saying the United
States was a corrupt oligarchy even before it was true. (audience laughing) I think that should have been a big hint to the Clinton campaign that
things had come unstuck, and they could not run as the presumed. The committee had met, and she
was to be the next President, but people had to cast their votes. In the last two weeks, in television ads, in Pennsylvania, and
Michigan, and Wisconsin, Trump was running ads that
were to the left of Bernie. They were attacking Clinton
as the tool of Wall Street. They were attacking her for
the Goldman Sachs speeches. Now was any of that sincere? No, of course none of that was sincere. But I think that’s a pretty big indication of something gone terribly
wrong in our economy, and in our political system, in our society, and people
don’t have the trust in our political
institutions they used to. You know I uphold, after
I’ve done all this stuff, I thought I’ve done all this stuff, I probably ought to ask
the people I represent if they like it, so I polled it, and they loved it. I mean I had introduced the legislation that Sherrod Brown and Ted
Kaufman introduced in the Senate to cap the size of banks. A lot of other things, and I tested it, and it polled extravagantly well. The problem was people
didn’t quite believe it. They thought okay, he says he
did this but there’s a catch. That’s a real problem
in American politics, they don’t trust their politicians, they don’t trust their institutions. They think that important
decisions are made behind closed doors by
people who don’t really have their interest at heart. That’s the problem for
sustaining democracy, making democracy work. – I largely agree with that. I did think 2016, exactly as you said, I mean the phenomena that
some people are choosing between Trump and Sanders
should tell you something. This was a protest
built against the elite. This is not working. This was very much a populist reaction, and that was a central dynamic, and the Clinton campaign
was pretty tone deaf. I mean she ran as the, I’ll keep it going, things
aren’t that bad candidate, which was a great message. He’s, things are terrible
and I’m gonna fix it. I alone, he gonna fix it. We’re gonna make America great again. I mean I have no brief for Trump, and he’s a grifter and he’s a fraud, but he was brilliant. – [Brad] Low life as well. – We could put that in there, but his message did resonate with people who felt like the elites, that
it was not working for them. There were other dynamics
but that was central. Now the question for 2020 is
whether we’re still there, and the direct effects are
attenuated over time obviously, but nonetheless the
ripples are still there in terms of the polarization that exists in the society. Here we have a situation
now where on the left, people are actively
talking about socialism for the first time in a long time, and very aggressive policies
on medicare for all, or the Great New Deal, that
would have been beyond. Then, of course, a
President who’s decided, great, I can run against these socialists. But that dimension is very much related to this in some ways. How this’ll play out, God knows. I mean in some sense it will
be a referendum on Trump, certainly, or at least
in part hard to know, exactly how this class dimension to it is going to be a part of the conversation. You can already feel it. It’s already there in the campaign. So I do think as I said earlier, there’s a relationship here, not just the financial
crisis, but the aftermath, of the extent to which it was part of, or it made more salient
what was already happening in the great divide in
America in terms of wealth, but also issues around race, education, and like the ways in which
we are quite polarized. Not all ultimately you
can’t blame entirely on the recession, but it
certainly made those dimensions more salient, and accentuated them. – So before we open it up for questions in just a few minutes, I’d
like us to take a step back to where we started,
which was thinking about not just the political
and social dynamics, and the U.S. contacts, but more globally. So I’d love you all’s
thought about how the crisis impacted the politics or
society in other countries, or how it shaped
international institutions, or the sort of balance of power in the geopolitical landscape. – We can start with bank regulations. About 10 years ago while
the Basel II principles, which were developed by
the Committee of the Bank for International Settlements, were scorned for being
only partially implemented, and over complex, and not
saving us from the last crisis. I think there was a strong general respect for the fact that we needed
those kinds of institutions, and the financial stability
forum was upgraded by the G20 to a financial stability board, given a lot more powers
by the heads of state of the members of the G20, and it seemed like there
was a common problem that we all faced, and threfore, while we wouldn’t unify laws, we would certainly harmonize them, so the global derivatives
activities and that would be subject to
basically the same rules. Yet these same fishes, and forces have actually led to a collapse of that, to the point where there was even attempts to amend one of the Basels in Congress over the last two years to prohibit the U.S. regulators
from applying Basel III, which was preposterous,
since we basically detected the tones of it. But nevertheless, it’s
a strongly held feeling, and I knew you were gonna
ask something like this, so I couldn’t resist bringing a letter from the Financial Times today. This was from two days ago, and when I read it, I was
slack jawed, but it is, “As the UK heads towards a
glorious re-establishment “of its sovereignty through a hard Brexit, “it is now time to consider its exit “from other outrageous restrictions
on its national rights.” I’ll skip the next paragraph, but then the following one says, “Brexit is only the beginning. “I await Boris Johnson and Jacob Rees-Mogg “bringing these matters to
a national referendum and, “ultimately, the complete liberation “of the British Nation from the evils “of quote international agreements.” That’s written by an
American professor of law, Case Western University,
and I first thought, I’ve gotta check him out. It turns out he is not an
ignorant man by any means, he was in the IMF. He has written quite
eloquently on international terrorist financing, and so on, and he deeply, deeply believes something that I absolutely do not, which is that international agreements are a form of enslavement. Now if you’ve got somebody
of that prominence adhering to this, we can’t just reject it as
this the know nothing party that just doesn’t understand
how international matters work. I think what once again,
we’ve seen being brought out to the surface, a very
different conception of what it is to be a citizen and what it is to be a nation. – I represent a rock
star in Caswell County, and you want me to speak
to global politics. – [Mercy] Well you can pass. – [Lawrence] But he will. (audience laughing) – But I will. There was a reason I kept
putting my name on ballots. Part of the commentary I
saw after the Brexit vote, which came in 2016, well
before our election. The discussion was just tell us anything about what our election will be like. One thing I read was, well no, things are really different. There is a policy elite
in the European Union, and there’s a resentment that they’re making these decisions, these arrogant elites,
policy elites are making these decisions in Brussels
that everybody else has to live with, and they’re beyond the control of democratic processes. There is a democracy deficit, and we don’t have a democracy
deficit in the United States. I thought the hell we don’t. I think there’s a lot
of the same resentment. Second, I think we’ve
lost a lot of credibility in the world. Certainly with Trump’s presidency, we’ve lost a lot of
credibility in the world, but we’ve lost a lot before that. I think we don’t have to
have more discussion now about how much criminality there was, but when I did travel around the world, congressional delegations,
CODELs and the lingo, we always got talking points
from our embassy staff, that when we met with
the government officials, of that country, what
they wanted us to say, and there was always
some form of corruption they wanted us to really encourage them to come down on. You know, it’s usually petty stuff. Not necessarily the people
we will be talking to would be engaged in it, but the brother-in-law
probably was, and we did. I can’t imagine that
we have any credibility on that kind of thing now. – So I alluded to this
in my opening remarks. I mean, I think it’s had profound effects around the world, Britain, in the EU for, what you were just talking about, tension with Greece, and
the austerity measures that really have arrested the momentum of the EU experiment. It has reverberated in
Hungary, and Poland, and in the retrenchment from democracy in a lot of ways. I mentioned Bolsonaro. We could look around the world. Now again, not everything due to that, but I think the similar
dynamics in every country, rise of populism, a rise of nationalism, a sense in which we want to
return to national sovereignty, and threfore rejection in many quarters of the central tenants
of what had structured the world order for a long time, going back to Bretton Woods
and the enormous effort to create a global system
of multilateral institutions intended to foster cooperation. I said at the beginning, a lot of us who study these things sort of imagine that the arrow of history was very much all in that direction,
and would forever be, and that is not at all
that we’re seeing now. That quote from the Financial Times it’s indicative of, you know, it’s not universal, but of a retrenchment around the world. To me, among the many things here, though in coming back
to the United States, is we were, and have been for a long time, the indispensable nation in this space. We were the architects of this system. We were, not just because
of our hard power, but because of our soft power that was a sense in which the world was moving towards us. In looking at China, we
imagined pre-Tiananmen anywhere, that, that was coming to us. There was a notion that in it, that’s not there now, and I think the crisis was a part of put in motion factors that have now to a
great extent delegitimized that Democratic liberal order
as a model for the world. We are at a point now of chaos out there in terms of what is the model? What is the way forward? You have a very vigorous China
moving very, very rapidly, and aggressively, and with some admiration around the world. Maybe that’s a better model. The polls show that the
support for democracy, and belief in that is the best system, is declining, etc. I don’t mean to be, I mean
this is all very dark, but it is right now a chaotic situation. How much of this would
have happened anyway, hard to say, we were
always going to decline. We were never going to always
be the only superpower, but a lot of the forces put in motion, are catalyzed by the Great
Recession around the world are playing out now, in
very counterproductive ways in terms of U.S. interests, and I think in terms of world order. – Well on that somber, but
important cautionary note, I’d like to open it up
to you all for questions for our panel about the
social and political impacts of the crisis. Yep. – [Ashton] Hi, Ashton
Merck, history department. I’m teaching a class of
undergraduates this semester, and I realize that my
freshmen were eight years old in 2008, which is really
terrifying for all of us. It makes me feel old too. Something that I would like
to see all of you address is this generational shift
that we’re undergoing, that matters for the difference
between history and memory. Most of us who are in
this room have some memory of the financial crisis. Some of it’s work specific, or direct, than others, those who were involved, but the young adults in college today, some of whom, especially at Duke, may still be interested
in going into finance, they have no working memory of the crisis, or they may have a very vague memory, which may feed into this
politics of resentment, in the sense that maybe
their family lost their home, or their neighbors lost their home, but they don’t really know why. So I’m just curious for your take on this both in terms of what
you’re doing as academics, or in politics for this
upcoming generation that may need actual
information that they can’t rely on their memory for. – I was originally the keynote speaker at a model UN conference here in Durham. There was 600 young adults there, and I gave a brief
history of the world order kind of thing, bored
them to death, I’m sure. But I felt like they needed to understand something about the Atlantic Charter, and the history of Bretton Woods, and the history of the
International Order, and it was a big sweeping talk, and they seemed to listen. Afterwards a group of them
came up to me and said, that’s the first time I’ve ever heard anyone say anything positive about these international organizations. Are they actually good
for the United States? I’m like, yeah. (audience laughing) At least that’s the way the
rest of the world views it. They had their flaws. We can talk about those flaws, but by and large the systems
work pretty well for us, and what was striking to me was the narrative I have in mind is of world of chaos in World War II, and of America as the hero of that, figured out a way to
restore order in the world in a way that advanced,
imperfectly to be sure, a humane capitalism, and democracy in the world, and by and large that worked well and we don’t know what the world
without those institutions, or without that ethos
is going to look like. So yeah, there’s a real loss here. That thing that many of us
probably carry in our heads, that just was not there with them. So I don’t know if I helped, at least with the 12 of them
who were gathered around me. At the end, maybe I made a difference. – There’s obviously a
divide, a generational divide and it is based upon experience, and not just the lack of memory, but the experience that
young adults have had with the economy. There are lots of folks
who are head over heels in student loan debt. They can’t get out of it. The entry level jobs, and
there were articles about this in 2009, ’10, ’11, that the folks who are getting out of college now, this is going to be a detriment to them throughout their careers
because they didn’t have that first job out of college they needed to set them on a path. So the experience has been unfavorable, so why would you expect there
would be a lot of support for the status quo, or for the status quo that existed before. – Of course, we’ve only focused on finance when inextricably part
of this is technology and that’s the biggest influence
I’ve noticed with students. But I’m a bit more
optimistic in the short term, and that is I ask my students, and they’re a few years older ’cause they come in as law students, how they experienced the financial crisis. They were about 14, 13, 14 now, and of course each year it’s changing, and they usually say they
remember that their parents were very worried. So like the Great Depression,
the impact of which lasted I think for at least two generations, somewhat confused by the war, I think they at this stage are concerned. Every year my classes, and the class that Lee and I teach, is over subscribed. We have to limit the numbers. Did a financial crisis
register respective last year and I was limited to 10,
and I ended up taking in 14 and had to reject others who were begging to get in. Many of them are not ones who
had taken bank regulations, but they knew it was really important. So I think we’ll see that
continue for a while. It may not be true of
the much younger ones, as they age up, but at least this current wave of students who will graduate over the
next three or four years, they may not have experienced it directly, but they know that it’s really important. Now if you say well
how does it affect you, not one of them has
ever been into a branch. I ask them every year when they come in, have you been to a bank branch? It’s not only that they
don’t put their hands up, I’m not sure that many of them even know what I’m talking about. (audience laughing) How do you pay each
other, and it’s all Venmo, and other apps. So for them, finance is
changing dramatically. It’s very retail oriented, and so on, but intellectually I
think they still think it’s really important. That will change I’m sure
as the younger ones age up, and the parents age out so they’re no longer influencing them. – Other questions, yes. I think she’s coming with your mic. – [Woman] You guys have talked about how there’s a distrust there, and my question is, when do
you think there was a time there was trust, and how
do you gain that back? – It’s always been imperfect, but in the 1960s, even
during the Vietnam War, when Americans were not
really told the truth about what was going on, there was a question in polling then, do you think people in
government most of the time do try to do the right by most Americans? That poll question got
big numbers in favor. Yeah, people thought they
might disagree with them. They might disagree
with how they called it, but they thought they were
trying to do the right thing. They don’t think that now. I mean, I saw my own polling. People didn’t have anything
against me personally. In fact, I was relatively popular compared to other politicians, but when the poll script
told them I’d done something that they liked, they were skeptical whether I’d really done it or whether there was a fish hook in there somewhere. – If you take that particular poll, it’s in the ’60s, ’70s at that point, that we were lied to. We didn’t know we’d been lied to but we discovered that
somewhere along the line. It drops, its drops, it drops, but we’re now in the teens, high teens in terms of yes on that question and have been now for some time, but in addition about government, the same thing around media, do you trust the news organizations? The same thing across
multiple universities, we still have fairly high
trust in military and police, but across the board there’s
been a decline of trust of traditional institutions. You know trust is a valuable thing. It really is. When you trust each other. The story we heard John
Mack tell this morning about trust between two people, how efficient that transaction is when you are able to trust
each other as a society. In any circumstance when
you don’t have that, and we don’t have it right now, of politicians, of the Congress. Well you can ask it any way you want, and it is at a very low level right now. – 1960s has been a generation
since the New Deal, and during that time,
the economy had become more and more productive, and it was a broadly shared prosperity. Income and equality
has shrunk dramatically to what it had been in 1920s, that led to the Great Depression. They were pretty, to use the
Martin Luther King phrase, that he actually copied from someone else, it did seem like the arc
of human history was long, but it did bend towards justice. It had seemed to bend towards justice during that period. – [Mercy] Here. – [Man] The global crisis
was largely happening because of the lack of
checks and balances. For example, the rating agencies didn’t think that the people would default in their mortgages at all. Do you think that in terms
of legislature environment, due to legislative environment, the more checks and
balances will be implemented further down the road, to avoid this kind of
thing from happening again? – I’ve got old guy ears. Could you repeat that? – So let me know if I’m
summarizing it correctly. The question was about
whether there will be additional checks and balances introduced into the legislative process, specifically for credit rating agencies. – I don’t know. There was a discussion of
credit rating agencies, and I was not terribly
involved in that part of the response to the financial crisis. I know that what Barney
wanted was to find a way for their ratings not to be so important, but there was, as one of the
speakers this morning said, there was kind of an
inherent conflict of interest because they were paid by
the people whose assets were being rated, which gave them, even if you’re an honest guy, there’s something tugging
at you subconsciously, of wanting to get that business again, so I don’t know. I think there were proposals
to have the rating agency be randomly assigned. That might have helped a little bit, but that hasn’t been
enacted, I don’t think. – [Mercy] What about broader? I think you were also referring to broader checks and balances, as operationalizing the
legislative process? – It’s pretty hard to design
a financial reform program that doesn’t require regulators to act, and isn’t vulnerable at some point, to those regulators becoming captured. Even when the reason they
were given those powers is very much in the
forefront of their thinking, that will pass as the question earlier about the folks who are now young adults, and they were eight when
the financial crisis hit. What will they remember, and will they believe? You know a lot of the New Deal regulations were treated in the politics
of the ’80s and the ’90s, is kind of old fashioned,
declasse, sophisticated, that was when we were unsophisticated. That wasn’t when we had risk models that assure that nothing like that, like the financial crisis of the ’20s, and the Great Depression
could never happen again. I don’t know a way. I mean, I think as much as we can create systemic protections that
don’t depend upon regulators, the better it is. For instance, a capital
requirement of capital, of 20% or even 25%. That sounds like a lot, but it just means they
retain their earnings for a few years, a couple years, and not pay dividends, and
not buy back their stock. That would provide an enormous protection against having to bail out. Face the choice between
bailing out the economy, bailing out those institutions and seeing the economy collapse. There’s always gonna be a problem. The end of the movie The Big Short, where I think the Steve
Carell character says, the next time this happens, they’re gonna be blaming
the immigrants again. That really wasn’t funny to me. It was a funny line, but
based on my own experience, and I don’t think it
was so much immigrants, but I think it was black
folks that were blamed. – I think the problem
is actually even deeper, and I’m fairly optimistic
that we won’t see a financial crisis like
the one we saw last. I think we’re not giving
institutions enough credit for the enormous advances
in risk management, in capital management, and I would hope. I don’t know much about the regulators, but I would hope, and
their awareness as well, I think it’s gonna be, Emma mentioned that the next crisis will come
when we don’t see it coming, and so I do believe we will have one. I’m very much a Hyman Minsky adherent, that is the instability hypothesis that it’s inherent in
the nature of capitalism to have crises, and
the incentives are such that they are inevitable. We just know what’s gonna trigger it. It could be a war for goodness sake. It could Kim Jong-un. We just don’t know, but
I’d be very surprised if it’s going to be the
causes of the last war. I think it’s gonna be something different. Now I could be dead wrong. Maybe I’m being very complacent, but I used to be terrified of banks of the size of J.P. Morgan in 2012. I’m not any more. I think they are so sophisticated compared to what they were like before, that you may have a general argument that they just shouldn’t be that big, and I don’t buy that argument any more, even though I used to write about the banks should not
be as big as they are. I think we’ve gotten much better at that, but that’s really putting
my head out on the block. – But they said they were
sophisticated before. – But they weren’t aware
of any of the things that caused the crisis. Yes risk management was,
I remember, visibly, it was regarded as just a darn nuisance, and it was a place where you sent people like the British Civil Service used to send people to Ballymackey, as a promotion to nowhere, and nobody took them seriously. I totally get that, but I don’t think financial
institutions or businesses intentionally set out to commit suicide. I think they really think
they’re doing the right thing, and it is our job to structure things so that they are not
forced into situations or stupidly into situations
that are suicidal. But I also think that
it’s not gonna be that, it’s gonna be something
else that trips them up. – I’ve been so negative. I mean, here’s a positive thing. I do think, by and large I agree with you, that we face a crisis, we have evolved, we have once named, thought of
ways to regulate this better. I agree with that. The next crisis is not this one. If I wanna put a positive
face on things that I do see, I do think the kinds of things that at least I’ve named with
regard to American politics, I’ve said nothing that a lot
of people aren’t also saying, that we’re on the case. I know here in North Carolina
something that I direct, and that we pulled together, a leadership forum
that’s a bipartisan group across the board, business
leaders, elected officials, and the like, and we ask people to do this and spend an enormous amount of time. They commit to four
day and a half sessions over the course of a
year, very busy people. No one says no. Everyone says yes, I
wanna be a part of this. So if you’re looking for positive things, I do think there’s a sense out
there that things are broken, but there’s also a hunger to try, at least in some quarters, to
try to tackle this problem. So if we wanna have a more positive note, I do believe in our capacity once named to addressed problems,
and so this is a hard one. I don’t know the way out
of the box right now, but a lot of good people
are working on it, including the students, by the way. I said something about
the high school students, but our students, at
least the ones that I get to interact with are on the case. They see this, that is
say this crisis of trust in the society as a central
issue for their time, at least some substantial number of them here at Duke, and that does
give me cause for hope. – [Mercy] We have time for
maybe one more question. Here. – [Man] All right, I wanted
to start off by saying I think it’s so ironic that
anybody’s giving credit to the British for giving
us a lecture on sovereignty, given their history, (audience laughing) of India, the partition, and Middle East. Second question, what I have to say is, that old Latin saying about
to the victors go the spoils. You hear it a little bit earlier, and I’ve thought this
for the last many years, that we’re seeing this mild
reinvention of what happened, and the comment that Ben
Bernanke and Timothy Geithner, and some others really are heroes. It depends on the perspective
that you’re looking at in defining a hero. To me, I wouldn’t necessarily say that. To some degree I’ve
wondered, would main street have been better off had
we allowed some failures, some bigger failures. If you look at Tesla, for example, and you look at Fintec, one might argue that what we did by giving TARP money, or by the automobile
bailout is we just basically gave the dinosaurs a lifeline and stunted the growth of Tesla, and the future of automobiles. We did the same thing to Fintec by not letting the bad policies, the bad ideas fall by the wayside and allow new intervention
there, or new ideas to come to fruition. I wanna hear your thoughts. – I think we’d been a lot
better if we’d followed Bagehot’s play book, and
we had ruthlessly decided which institutions were insolvent. We had taken them through receivership so they came out on the
other side with new owners and clean books. We offloaded their bad assets
to some other institutions like the Homeowners Loan Corporation, or what was it in the ’70s
for the savings and loan, Resolution Trust Corporation, and that the ones that were illiquid, be provided liquidity,
but on punitive terms. Instead we provided liquidity on remarkably indulgent
terms to everybody, some of which were truly insolvent. We were not told the truth
about a lot of things in the middle of all that. When I say we, I’m including Congress, the American people in Congress. Sarah Bloom Raskin who’s
one of the good people in all this. I’m not criticizing her, but she said, in the panic there was
a page and a half bill just give us $800 billion and you can’t do nothing about it. We’ll do with it whatever we feel like, and Congress expanded on that some, changed that a little bit. But that wasn’t developed in a panic. After the Bear Stearns attack, Neel Kashkari was assigned the task, that was called the Break the Glass Memo of what to do if there really was a crisis like what we had with Lehman. We were told with respect to AIG, if AIG fails, there will
be widows and orphans who can’t collect on their
father’s or their husband’s life insurance policy when they die, and they were counting
on those to survive. Well they didn’t have a
damn thing to do with AIG. AIG was entirely about credit-fault swaps. The subsidiaries that wrote life insurance and all the other forms of insurance were separately funded subsidiaries. Separate subsidiaries, and
I assume everybody here knows what that means,
and it was all AIGFP, and all of AIGFP’s credit-default swaps were guaranteed by the parent. It wouldn’t have affected life
insurance policies at all, and according to the trial,
was it Hank Greenberg brought a lawsuit, and had
big deal lawyers bring it, and the evidence showed that
if AIG had not been rescued, and they had not been able to pay on their credit-default swapped positions, Morgan Stanley (fingers snapping) would have been bankrupt like that, and Goldman Sachs right behind it. Then who know what would
have happened next. You know, I think one of
the advantages of going that route, is that an approach to a financial crisis that maintains market
discipline, is important. I think one that is consistent
with American’s values is important. We didn’t do either. – [Mercy] Unfortunately I
think we have to leave it there because we are out of time, but we can continue this
conversation in the reception. Please join me in thanking our
panel as for a great panel. (audience clapping)

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