Nobel Laureate Stiglitz Says Banking Problems Are Now Bigger Than Pre-Lehman

September 13, 2009 by · Leave a Comment
Filed under: Opinion 

Mr. Stiglitz makes a very good point that we have not done anything of significance in the form of bank regulation to prevent this from happening again.   He is also right that the banks have started pushing back.   It is quite obvious when you look at the facts to date that at bare minimum, some crimes have taken place and the people who are complacent need to held to account.  Through these investigations, we will learn how these frauds took place and that will give us information needed to make prudent laws.

To be clear, when I say fraud I am talking about the number of financial instruments that were sold when they were of dubious qualities.  This fraud will only last so long until the common person gets fed up and start spreading information around and starts calling their representatives to hold them to account on why we have given the banking system $23 trillion dollars of taxpayer money and not even committee to investigate what really happened.

Bloomberg, Paris – Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.

“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”

Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”

A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.’s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.

While Obama wants to name some banks as “systemically important” and subject them to stricter oversight, his plan wouldn’t force them to shrink or simplify their structure.

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