Stiglitz , first published in by W. While focusing on the roots of the financial crisis of and the subsequent global economic slowdown , which he claims to find mainly in fiscal policy as conducted during the Bush presidency and decisions made by the Federal Reserve , Stiglitz also talks about the failure to cope with the recession during the months succeeding the Wall Street Crash of Finally, he sketches various schemes as to the possible future of the American economy , vigorously proposing a profound policy shift. In compliance with Stiglitz's general attitude towards economic policy , Freefall contains "proposals to tame the banking sector and to foster a more humanistic style of capitalism in the United States and abroad. The title of the book points at the sharp decline in stock prices following the bankruptcy of the investment bank Lehman Brothers in September, Meanwhile, its subtitle reveals Stiglitz's conviction that free markets are at the bottom of the crisis, as he makes deregulation responsible for the rise of the shadow banking system , over- leveraged banks and subprime mortgages.
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Joseph E. But Mr. Stiglitz laments that the president failed to make good on such soaring rhetoric. He argues that Mr. Obama has continued for the most part to pursue the failed policies of George W. The results speak for themselves, Mr. Stiglitz says. But the end of freefall is not the same as a return to normalcy.
That raises a question: How is it that Mr. Obama the candidate understood the need for economic reform while Mr. Obama the president became a defender of the status quo in many unexpected ways? Stiglitz, a former chief economist at the World Bank who spent time in the White House as an adviser to President Bill Clinton, thinks he knows the answer. He writes that Mr. Bernanke, the Federal Reserve chairman; Timothy F.
Geithner, the Treasury secretary; and Lawrence H. Stiglitz says that these are some of the same people whose policies brought us the economic collapse of That is sure to rankle their supporters, but Mr.
Stiglitz, a fine writer, makes a persuasive case. He says that after Mr. Bernanke replaced Alan Greenspan in , he had a chance to prick the credit bubble. Instead, as we all know, Mr. Bernanke continued the low-interest-rate policies of his predecessor. Stiglitz writes that Mr. Yes, Mr. The author is especially critical of Mr. Summers, his former colleague in the Clinton White House, who helped thwart an attempt to regulate derivatives in the waning days of Mr.
The same financial instruments, of course, played a devastating role in the recent crisis. Instead, he writes, it doled out more bailout cash to banks and floated bad ideas. Who would be burned if these deals went bad? The taxpayer, of course. Stiglitz argues that this was fine with Wall Street and that bankers were also stalling for time. Delays by the administration, Mr. Stiglitz believes, will almost certainly prolong the recession. He offers a long list of proposals to tame the banking sector and to foster a more humanistic style of capitalism in the United States and abroad.
Stiglitz argues that so-called too-big-to-fail banks like Citigroup are exactly that: too big. He says that they should be broken up, and that the government should regulate derivatives and discourage mortgage securitization.
He points to Sweden as an example of a country that has a thriving economy but still provides its citizens with extensive social services. THESE may all be worthy ideas. But at times, Mr. Can you imagine President Obama going before the American people and telling them they need to emulate Sweden? Imagine the fun Glenn Beck would have with that. And in his State of the Union address last week, he followed this up with proposals to help people whose lives have been upended by the crisis. Stiglitz is unlikely to have all his wishes granted, but it appears that the White House agrees with one of his arguments.
Business What Happened to Regulatory Reform? Home Page World U.
Freefall: America, Free Markets, and the Sinking of the World Economy
Joseph E. But Mr. Stiglitz laments that the president failed to make good on such soaring rhetoric. He argues that Mr. Obama has continued for the most part to pursue the failed policies of George W.
Excerpt - Chapter 1
The only surprise about the economic crisis of was that it came as a surprise to so many. For a few observers, it was a textbook case that was not only predictable but also predicted. A deregulated market awash in liquidity and low interest rates, a global real estate bubble, and skyrocketing subprime lending were a toxic combination. Add in the U.
What Happened to Regulatory Reform?
N o one can say they weren't warned. It was a full-on attack from a Washington insider and it hurt, especially when Stiglitz said many of those responsible for forcing countries such as Thailand and Indonesia into deeper, longer recessions were "third-rate graduates from first-rate universities". He concluded his essay in the New Republic by warning the IMF and the US Treasury that unless they began a dialogue with their critics "things will continue to go very, very wrong". Now they have. The Asian crisis of was merely the warm-up act for the events of the past two and a half years. Problems that first surfaced on the periphery of the global economy gradually worked their way to its core — the United States.
Freefall: Free Markets and the Sinking of the Global Economy by Joseph Stiglitz