Elizabeth Warren is a Harvard law professor and currently chair the five-person Congressional oversight panel for the $700 billion bailout fund. She was on the Daily Show
Jon Stewart: Why isn’t the first thing we do is to say that no one will be allowed to be too big to fail. That is a license to commit poor banking practice.
Warren: So what you’re asking is if we can get this bus pulled out of the ditch – the economy – what does the road look like going forward? This really is the big question.
Let me start that question in 1792. Young country, George Washington is in his first term, and we have a credit freeze. There’s a financial panic. Every ten to fifteen years, there’s a financial panic in our history. You can just look at it. And there’s a big collapse, big trouble, people lose their farms, wiped out. Until we hit the Great Depression. We come out of the Great Depression, and people say you know, we can do better that this. We don’t have to go back to this boom and bust cycle.
We come out of the Great Depression with three regulations: FDIC Insurance, it’s safe to put your money into banks; Glass-Steagall, banks won’t do crazy things; and some SEC regulations. We go fifty years without a financial panic, without a crisis …
Stewart: A couple of recessions in there, some down times …
Warren: But no crisis, no banks failing, no big crisis, that sort of thing …
Stewart: S&L…
Warren: Now wait a minute. I said fifty years. Because then what happens is we say regulation is a pain, it’s expensive, we don’t need it. So we start pulling the threads out of the regulatory fabric. The first thing we get? We get the S&L crisis. 700 financial institutions fail.
Ten years later what do we get? Long term capital management, when we learn that when something collapses in one place in the world, it collapses everywhere else.
Early 2000’s we get Enron, which tells us that the books are dirty.
And what is our repeated response? We keep pulling the threads out of the regulatory fabric.
We have two choices. We’re going to make a big decision, probably over the next six months. The big decision we’re going to make – it’s going to go one way or the other. We’re going to decide, basically, hey, we don’t need regulation. No, it’s fine … boom and bust, boom and bust, boom and bust and good luck with your 401K. Or alternatively, we gonna say you know, we’re going to put in some smart regulation, it’s going to adapt to the fact that we have new products. And what we’re going to have going forward is some stability and some real prosperity for ordinary folks.
Stewart: And that’s socialism.
Piece of Mindful 
I can’t think of a single country, heavily regulated or otherwise, that has been both continuously prosperous and escaped economic cycles of their own making or affected by on a global scale. Mr. Warren’s wish/claim is without historic merit.
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sorry, “Ms. Warren.”
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Did you read her words? She agreed with you on the economic cycles, but stated that we implemented changes after the depression that gave us 50 years without them. That’s what you must address. Your response is way off target.
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The woman is a dingbat, a typical affirmative action “professor” and government appointee with a typically mediocre education disguised by credentials she never earned.
From 1854 to present, there have been 33 boom and bust cycles in the US economy. In the approximately 75 years before the Great Depression, there were 19 boom and bust cycles. In the approximately 75 years after the Great Depression, there have been 13 boom and bust cycles, ten of which occurred in the 50 years immediately following the Great Depression. [Source: “Business Cycle Expansions and Contractions,” National Bureau of Economic Research.]
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Your attack on her credentials is dead on. You’ve obviously got some chops yourself, and a deep background in … what is it … summa cumma lotta in economics or history?
Anyway, false between the 1930’s up until 1987, there were recessions, but no credit freezes, no actual “busts”. You’re simply full of it.
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Mark, I disagree. See: http://www.fdic.gov/bank/historical/history/3_85.pdf
================
The Banking Crises of the
1980s and Early 1990s:
Summary and Implications
Introduction
The distinguishing feature of the history of banking in the 1980s was the extraordinary upsurge in the number of bank failures. Between 1980 and 1994 more than 1,600 banks insured by the Federal Deposit Insurance Corporation (FDIC) were closed or received FDIC financial assistancefar more than in any other period since the advent of federal deposit insurance in the 1930s (see figure 1.1).
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If you read carefully, you will find that you and Ms. Warren are in harmony. “Between 1980 and 1994” would em compass the S&L crisis, caused by easing of regulations. Stewart mentioned the S&L debacle, and she said
I find most of the right wing to be in denial regarding the coincidence of bubbles, bank failures, and deregulation. If you believe right wing economists, such as Friedman, you have to be in denial. There’s no other way to square the world with your beliefs.
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Warren: We go fifty years without a financial panic, without a crisis …
Stewart: A couple of recessions in there, some down times …
Warren: But no crisis, no banks failing, no big crisis, that sort of thing …
==============================
In the 50 year timespan the FDIC points to 1600 bank failures for just 1980 to 1994. Banks fail when the economy struggles. Her “smart” regulation idea won’t change that, and their is no historical example to support her claim.
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s/b “there.”
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You lose again, Mark, because you never do your homework. Your idea of “research” is to disregard the established facts and instead seek out other ideologues who agree with your preconceived notions. (We’re still waiting to hear your rebuttal to the National Bureau of Economic Research.)
No matter if you’re lazy or just uneducated, you will never win an economic argument based on anecdotes.
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Peck 2,
I heard Ms. Warren’s comments, and I looked at the NBER figures. The second does not relate to the first. Ms. Warren did not claim that the New Deal negated the natural business cycle, what is what the BBER appears to track (not “booms and busts”). She does claim that regulatory reforms in the 1930s did avoid the kind of panics that typified the American economy before then.
You have yet to demonstrate otherwise. Instead, you resort to a personal attack. Which means that you deserve to be the target of one, but let that pass.
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If you knew anything about our economic history, you would know that “crisis,” “contraction,” “bust,” “depression,” “panic,” “recession,” “smash,” and a host of other words have been used to describe economic downturns. Likewise, economic upturns have their analogues terms.
The business cycle is the boom and bust cycle, idiot.
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Peck2, Mark and Steve make it possible for people to discuss points of view and ideas at their blog. How about you raise your game and knock off the useless name calling?
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Craig – please be more specific as to the dates of bank failures. She puts 50 years as ending some time in the mid-80’s, where you keep mentioning dates as far out as 1994, well after the deregulation that triggered the S&L crisis. That crisis alone triggered 700 failures.
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Mark, look it up in the FDIC report link that I left. I believe it’s all there.
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Peck 2, Those words have all been used to describe the economy, but that does not make them synonyms. Many words also have been used to describe the general concept of “idiot,” but you seem to be staking out a definition all your own.
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What in the hell happened to this thread of comments?
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Ed – click on “older comments” below. It chops them off at 15, I think.
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