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One Year After Financial Crisis, Reform Questions Loom

On the one year anniversary of the collapse of Lehman Brothers, Jeffrey Brown talks to economists and experts about what has been learned and the future of financial reform.

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    Jeffrey Brown looks now at where things stand one year later.


    And joining me for that are Nassim Taleb, a statistician, trader and author of several books on probability and risk, including "The Black Swan." He's an adviser to Universa Investments and teaches at New York University.

    Donald Marron is chairman and CEO of Lightyear Capital, a private equity firm, and former chief executive of Paine Webber.

    And Alan Blinder, professor of economics at Princeton University, he was vice chair of the Federal Reserve from 1994 to 1996.

    Donald Marron, you were at the speech today. Was the president right to warn of complacency on Wall Street? Has enough changed in the year since Lehman collapsed?

  • DONALD MARRON, Lightyear Capital:

    Yes, I think a lot has changed. He was very straightforward. I think he gave an outstanding speech. He was articulate. He certainly knew the issues.

    Basically, he said three things. The first one is, we need an agency to protect individuals against others who create products and against themselves. Secondly, we need more regulation to regulate all these securities firms and banks. And, third, we need legislative power to make sure this never happens again, that somehow it can be stopped before it goes over the edge.

    And I think he delivered each of those positively. Obviously, God is in the details on these things. But this is certainly a speech and a set of issues that wouldn't have occurred a year or year-and-a-half ago. It was an important change.


    Well, Nassim Taleb, you had warned of instability for many years before what came to pass occurred. So where do you think we are now?

  • NASSIM TALEB, New York University:

    Still the same situation. We have the same leverage in the system that we had before. The too-big-to-fail effect is right there, no different from what it was before. And banks are taking the same reckless risks they don't understand as they did before with the very same pseudo-scientists managing the risks.

    So I don't see what changed. And we have 6 million Americans at home now more than we had before. I don't see what changed. The risks are still there. We need to lower the leverage, make the world more robust, and it's not.


    All right, a lot of things to pick up there, but let me bring in Alan Blinder. First, a kind of general assessment. The president did talk about growing stability and gave credit to his team for bringing that about. You've talked about that on this program in the past, the need for all of that. What do you think now?

  • ALAN BLINDER, Princeton University:

    Well, I think things look enormously better than they were, say, six months ago, I guess the bottom of the stock — I think President Obama called the bottom of the stock market on March 9th.

    I think things his team has done have helped a lot. I think things the Fed have done have helped even more. The Fed's not part of his team, I might point out. It's an independent agency and needs to stay that way.

    But between the Treasury and the Fed and the FDIC and a few others, I think they've made an enormous difference doing, by the way, extraordinary things that I'm sure if you asked any of them two years ago would they ever do something like that, they would have said no.

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