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Wall Street Turmoil Marks Wholesale Shift in Banking Sector

After a week on Wall Street that saw stalwart financial firms fall and unprecedented levels of government intervention, NewsHour economics correspondent Paul Solman and market historian Richard Sylla offer perspective on the events.

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  • JIM LEHRER:

    Next, a bit of a history lesson about this unprecedented week on Wall Street and in Washington. Jeffrey Brown has that part of the story.

  • JEFFREY BROWN:

    The fall of storied Wall Street institutions, huge government interventions, and a sense of spreading global panic. It has been a history-making week and one that has evoked much comparison to past crises.

    To look at that big picture, we're joined by Richard Sylla, an economist and financial historian at New York University's Stern School of Business. And with me here is our own economics correspondent, Paul Solman.

    Well, Professor Sylla, the comparisons have been made to the biggest crises of the past, including the Great Depression. How do you see all this?

  • RICHARD SYLLA, New York University:

    It's similar to the crisis of the Great Depression, but it's different, as well, because in the Great Depression a great deal of economic damage was done because there was not strong financial leadership in the early stages of the crisis. And so the — you know, the leadership sort of came after the economic damage was done.

    I see this crisis as fundamentally different. It's a very big one, but I see the leadership being exerted in — you know, in the financial crisis itself before the economic damage is done. We're still not even sure we're in a recession in this economy.

    We may have one, but the leadership is coming in advance of the economic downturn. And because of it, we may have a very mild economic downturn or no downturn at all.

  • JEFFREY BROWN:

    But you did start by saying it was similar in some ways. How is it similar?

  • RICHARD SYLLA:

    It's similar in that it's a worldwide crisis and there are many financial institutions in deep trouble. And, you know, we — in the 1930s, 1930 to '33, we lost something like 7,000 or 8,000 banks.

    So that's the — you know, we have the potential to do something like that now, but I think we're going to avoid it.

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