The Coming Meta-Boom and Meta-Bust -- One Top Economist's View Part 1 of 2
Episode Description
Simon Johnson, a former chief economist for the International Monetary Fund and author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, says the recently passed Dodd-Frank Financial Reform Act does little to prevent the biggest financial risk of our time: banks that are becoming "Too Big to Save," either because potential losses could overwhelm government resources or the public will refuse to sanction another large bailout. Either way, the world economy could crash once again. But preceding any crash, watch for a worldwide "meta-boom." Knowledge@Wharton discussed this and several others issues with Johnson, including how shrinking down big banks could ward off financial meltdowns, Ireland's solvency-threatening debt burden and the implications of Basel III. 📂 Finance & Accounting
Brief Summary
Simon Johnson critiques Dodd-Frank, arguing it fails to address systemic risks and advocates for breaking up large banks.
Key points
- Simon Johnson on Financial Reform. Simon Johnson discusses the Dodd-Frank Act and its shortcomings in addressing systemic risks.
- The Dangers of 'Too Big to Fail'. Johnson explains the implications of banks being too big to fail and the risks involved.
- Moral Hazard Explained. A clear definition of moral hazard and its implications for financial institutions.
- The Crisis of 2008. Exploring the origins of the 2008 financial crisis and the failure to rebuild constraints.
- Basel 3 Compromise. Examining the limitations of Basel 3 regulations and their impact on bank capital.
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Episode highlights
- Simon Johnson on Financial ReformSimon Johnson discusses the Dodd-Frank Act and its shortcomings in addressing systemic risks.“"The legislation makes very little progress, if any, in the right direction there."”1:54Oct 12, 2010
- The Dangers of 'Too Big to Fail'Johnson explains the implications of banks being too big to fail and the risks involved.“"Too big to fail is not the worst of our problems. Be too big to save."”13:33Oct 12, 2010
- Moral Hazard ExplainedA clear definition of moral hazard and its implications for financial institutions.“"Moral hazard is very simply that when I give you insurance, you're going to be a little bit less careful."”16:44Oct 12, 2010
- The Crisis of 2008Exploring the origins of the 2008 financial crisis and the failure to rebuild constraints.“That's why we got the crisis of 2008.”17:53Oct 12, 2010
- Basel 3 CompromiseExamining the limitations of Basel 3 regulations and their impact on bank capital.“The problem at Basel 3 is...not enough.”19:10Oct 12, 2010
