examine large complex financial institutions on a real time basis. You can see a complete list at www.makemarketsbemarkets.com in the Roosevelt Institute Report.
and is out of prison, tries to alert the financial community of the impending economic disaster. Other than yourself, who are some of the real life tycoons trying to reform the system?
WL: Why are these reforms important? RAJ: I don’t believe I can be considered RAJ: Large complex financial institutions are essentially ungovernable. Too Big to Fail is a moral eyesore. Making markets more transparent, fair and regulatory information more timely and reliable will reduce the ability of these behemoths to act without fear of failure or risk discipline. They should be resolved when they fail. They should not be able induce society to bail them out for fear of taking us all down with them.
a tycoon. Jim Chanos, Paul Volcker, Henry Kaufman, George Soros, Felix Rohatyn, and
if they are not implemented?
RAJ: They all impact the probability and magnitude of a repeat of the financial crisis. Another danger is a loss of faith in the markets and the government, and the radical politics that will ensue.
WL: You’re obviously a pro-business others are spending time and energy on proper financial reform.
WL: What are the roadblocks to passing significant reforms?
RAJ: The roadblocks relate to the need RAJ: Finance is a means to support commerce. for lots of money to run a campaign in To those who call regulations socialists I would ask some questions. Most believe defense of property rights is necessary to a functioning society. That is a form of regulation. Adam Smith in the Wealth of Nations and Professor Hayek, the great conservative Nobel Prize winner both espoused the need for rules, laws and regulations. What is at issue is the matter of degree of regulation. … Most of the branding of ‘”socialism” … is a rather ugly smear tactic.
WL: In the original Wall Street film, Gordon Gecko was a Wall Street tycoon. In Wall Street: Money Never Sleeps, opening this September, Gecko, who has reformed
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RAJ: The political philosopher Sheldon Wolin wrote “Democracy Incorporated” exploring the theme of a corporate takeover of the state in what Wolin calls inverted totalitarianism. Corporate welfare becomes the role of the
“When Wall Street put over $300 MILLION into LOBBYING and CAMPAIGN CONTRIBUTIONS it overwhelms the political system while making a relatively small investment in protecting [their] own earnings.”
WL: What danger do you think we face
capitalist but many accuse regulators of being “socialists” and argue that markets left alone without regulation are good for competition, good for business, and good for innovation. What’s your take?
WL: Do you think there is a threat of a corporate takeover of our democracy? Do we need corporate accountability?
the media age. Senators and Congressmen spend about 70 percent of their time on fundraising. Top Wall Street firms made over $30 billion dollars in derivatives trading in 2009. Proper reforms would likely cost them more than 20 percent of that according to financial analysts. So, when Wall Street puts over $300 million into lobbying and campaign contributions it overwhelms the political system while making a relatively small investment in protecting [their] own earnings. The problem is that those very profitable OTC derivatives market structures leave society and the public purse exposed to great danger. This is not priced into the political system.
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state under his design. I do not believe that corporate accountability is the key. I believe the Supreme Court has done great harm to our nation with its recent decision in the case of Citizens United vs FEC [by] giving the same powers to our corporations as it does to humans or natural persons. Robert Johnson is director of the Project on Global Finance at the Roosevelt Institute and serves on the United Nations Commission of Experts on Finance and International Monetary Reform. He is a former managing director at Soros Fund Management, where he managed a global currency, bond and equity portfolio, and a former managing director at the Bankers Trust Company. Johnson has served as chief economist of the U.S. Senate Banking Committee and was senior economist of the U.S. Senate Budget Committee. He received a Ph.D. and M.A. in Economics from Princeton University and a B.S. in both Electrical Engineering and Economics from the Massachusetts Institute of Technology.
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