good afternoon and thank you for joining after class
after class
after class I’m really impressed that any of you
I’m really impressed that any of you
I’m really impressed that any of you might have decided that financial
might have decided that financial
might have decided that financial regulation was really the reason why you
regulation was really the reason why you
regulation was really the reason why you were here
were here
were here so thank you very much and what I would
so thank you very much and what I would
so thank you very much and what I would like to say is that having gone through
like to say is that having gone through
like to say is that having gone through all the demise of the 2007 financial
all the demise of the 2007 financial
all the demise of the 2007 financial crisis the so-called Lehman crisis or
crisis the so-called Lehman crisis or
crisis the so-called Lehman crisis or the subprime loan crisis that I will
the subprime loan crisis that I will
the subprime loan crisis that I will talk about I have continued to be
talk about I have continued to be
talk about I have continued to be haunted by the idea that regulators are
haunted by the idea that regulators are
haunted by the idea that regulators are in fact curing the problems of the
in fact curing the problems of the
in fact curing the problems of the previous and I’ve been following all
previous and I’ve been following all
previous and I’ve been following all that transformation and I’m asking
that transformation and I’m asking
that transformation and I’m asking myself what’s next where will the next
myself what’s next where will the next
myself what’s next where will the next one come from under the which fall so
one come from under the which fall so
one come from under the which fall so what I’m going to try to do is because
what I’m going to try to do is because
what I’m going to try to do is because this is a pretty dry subject let’s face
this is a pretty dry subject let’s face
this is a pretty dry subject let’s face it I am going to try to walk you through
it I am going to try to walk you through
it I am going to try to walk you through a story and I’m going to use cartoons so
a story and I’m going to use cartoons so
a story and I’m going to use cartoons so you might have heard about this country
you might have heard about this country
you might have heard about this country Greece has become for Europe the epitome
Greece has become for Europe the epitome
Greece has become for Europe the epitome of the financial crisis it was a small
of the financial crisis it was a small
of the financial crisis it was a small problem it was a small crisis but it
problem it was a small crisis but it
problem it was a small crisis but it mobilized everybody and the governments
mobilized everybody and the governments
mobilized everybody and the governments didn’t know what to do with it so Greece
didn’t know what to do with it so Greece
didn’t know what to do with it so Greece had to be built out by the private
had to be built out by the private
had to be built out by the private sector and by the banks and today Greece
sector and by the banks and today Greece
sector and by the banks and today Greece is not even resolved we are still
is not even resolved we are still
is not even resolved we are still talking about the problem of Masoud
talking about the problem of Masoud
talking about the problem of Masoud tsipras we are still talking about what
tsipras we are still talking about what
tsipras we are still talking about what can Greece do to pay its next debt what
can Greece do to pay its next debt what
can Greece do to pay its next debt what will they do to get another run of
will they do to get another run of
will they do to get another run of austerity however while the European
austerity however while the European
austerity however while the European Commission is spending time there trying
Commission is spending time there trying
Commission is spending time there trying to support Greece there is a much bigger
to support Greece there is a much bigger
to support Greece there is a much bigger danger that danger is call Italy we are
danger that danger is call Italy we are
danger that danger is call Italy we are currently in a banking crisis in
currently in a banking crisis in
currently in a banking crisis in but more importantly the problem of
but more importantly the problem of
but more importantly the problem of Italy is five times the size of the
Italy is five times the size of the
Italy is five times the size of the problem of Greece we can’t afford the
problem of Greece we can’t afford the
problem of Greece we can’t afford the collapse of Italy but like the PISA
collapse of Italy but like the PISA
collapse of Italy but like the PISA tower Italy is going down almost
tower Italy is going down almost
tower Italy is going down almost inexorably interest rates have doubled
inexorably interest rates have doubled
inexorably interest rates have doubled so how ten years after the Lehman crisis
so how ten years after the Lehman crisis
so how ten years after the Lehman crisis I will still confront it with problems
I will still confront it with problems
I will still confront it with problems of financial regulation and financial
of financial regulation and financial
of financial regulation and financial stability it all started because in the
stability it all started because in the
stability it all started because in the golden years of the 90s where we all
golden years of the 90s where we all
golden years of the 90s where we all over spent and made too much money that
over spent and made too much money that
over spent and made too much money that everybody said the banks have become
everybody said the banks have become
everybody said the banks have become wise and therefore we don’t need
wise and therefore we don’t need
wise and therefore we don’t need regulation and one by one regulation
regulation and one by one regulation
regulation and one by one regulation went done the gentleman on top of this
went done the gentleman on top of this
went done the gentleman on top of this is actually Ben Bernanke the chairman of
is actually Ben Bernanke the chairman of
is actually Ben Bernanke the chairman of the Federal Reserve and he said in a
the Federal Reserve and he said in a
the Federal Reserve and he said in a famous sentence markets know better than
famous sentence markets know better than
famous sentence markets know better than regulators how to organize the granting
regulators how to organize the granting
regulators how to organize the granting of loans except that that was based on
of loans except that that was based on
of loans except that that was based on an optimistic view of what actually
an optimistic view of what actually
an optimistic view of what actually banks would do what they did is this
banks would do what they did is this
banks would do what they did is this they lied to their customers by telling
they lied to their customers by telling
they lied to their customers by telling them we have a fantastic solution for
them we have a fantastic solution for
them we have a fantastic solution for you
you
you you are going to get a loan that will
you are going to get a loan that will
you are going to get a loan that will allow you to buy a bigger house or to
allow you to buy a bigger house or to
allow you to buy a bigger house or to buy your first house it’s going to cost
buy your first house it’s going to cost
buy your first house it’s going to cost you 2% I was receiving in my mail
you 2% I was receiving in my mail
you 2% I was receiving in my mail incredible ideas about you are going to
incredible ideas about you are going to
incredible ideas about you are going to burrow in LIBOR
burrow in LIBOR
burrow in LIBOR how many US citizens know what the
how many US citizens know what the
how many US citizens know what the London interbank offered rate could be
London interbank offered rate could be
London interbank offered rate could be well they built it they bought it and
well they built it they bought it and
well they built it they bought it and two years later the rates were adjusted
two years later the rates were adjusted
two years later the rates were adjusted and they couldn’t pay and in the US you
and they couldn’t pay and in the US you
and they couldn’t pay and in the US you cannot renegotiate a loan why because
cannot renegotiate a loan why because
cannot renegotiate a loan why because the banks didn’t keep them Citibank JP
the banks didn’t keep them Citibank JP
the banks didn’t keep them Citibank JP Bank of America were granting new loans
Bank of America were granting new loans
Bank of America were granting new loans at 2% that ended up being loans at 7%
at 2% that ended up being loans at 7%
at 2% that ended up being loans at 7% but the loans had already been packaged
but the loans had already been packaged
but the loans had already been packaged into some hedge fund kind of products at
into some hedge fund kind of products at
into some hedge fund kind of products at the same time we were in a situation
the same time we were in a situation
the same time we were in a situation where they didn’t service the loans
where they didn’t service the loans
where they didn’t service the loans because they had sent a service contract
because they had sent a service contract
because they had sent a service contract to people who were doing that we even
to people who were doing that we even
to people who were doing that we even went to a situation where the tsunami of
went to a situation where the tsunami of
went to a situation where the tsunami of those prime loans destroyed the real
those prime loans destroyed the real
those prime loans destroyed the real estate market but more importantly
estate market but more importantly
estate market but more importantly destroyed the people and I keep thinking
destroyed the people and I keep thinking
destroyed the people and I keep thinking of the story of that single mother with
of the story of that single mother with
of the story of that single mother with three children who one day left the keys
three children who one day left the keys
three children who one day left the keys of a home and for six months lived in a
of a home and for six months lived in a
of a home and for six months lived in a car that is what has been created there
car that is what has been created there
car that is what has been created there that is where the foreclosure which
that is where the foreclosure which
that is where the foreclosure which means you give the key you don’t have
means you give the key you don’t have
means you give the key you don’t have any liabilities anymore
any liabilities anymore
any liabilities anymore but you’re lost you are forever
but you’re lost you are forever
but you’re lost you are forever considered to be a bad borrower so
considered to be a bad borrower so
considered to be a bad borrower so having gone through that the President
having gone through that the President
having gone through that the President of the United States Barack Obama the
of the United States Barack Obama the
of the United States Barack Obama the website having gone through that we
website having gone through that we
website having gone through that we arrived to a situation where the banks
arrived to a situation where the banks
arrived to a situation where the banks didn’t know how much each of them had
didn’t know how much each of them had
didn’t know how much each of them had and they stopped lending to each other
and they stopped lending to each other
and they stopped lending to each other which they do for trillions and they
which they do for trillions and they
which they do for trillions and they deposited that money in central banks
deposited that money in central banks
deposited that money in central banks but all of a sudden we were in a
but all of a sudden we were in a
but all of a sudden we were in a liquidity crisis what does that mean
liquidity crisis what does that mean
liquidity crisis what does that mean that means that nobody knew exactly the
that means that nobody knew exactly the
that means that nobody knew exactly the amplitude of the crisis and it was the
amplitude of the crisis and it was the
amplitude of the crisis and it was the panic and it was the panic of a
panic and it was the panic of a
panic and it was the panic of a particular weekend that I remember very
particular weekend that I remember very
particular weekend that I remember very well that single weekend on Friday
well that single weekend on Friday
well that single weekend on Friday aliens wanted to buy AIG who became
aliens wanted to buy AIG who became
aliens wanted to buy AIG who became bankrupt three days later because they
bankrupt three days later because they
bankrupt three days later because they refused marriage was sold to Bank of
refused marriage was sold to Bank of
refused marriage was sold to Bank of America and when Lehman was supposed to
America and when Lehman was supposed to
America and when Lehman was supposed to be bought by Barclays Bank the
be bought by Barclays Bank the
be bought by Barclays Bank the Chancellor of the Exchequer you might
Chancellor of the Exchequer you might
Chancellor of the Exchequer you might not know that it is actually the British
not know that it is actually the British
not know that it is actually the British nice or financed cold its US counterpart
nice or financed cold its US counterpart
nice or financed cold its US counterpart and see we are not going to bail America
and see we are not going to bail America
and see we are not going to bail America out of its bedrooms three of the largest
out of its bedrooms three of the largest
out of its bedrooms three of the largest institutions collapse in one weekend and
institutions collapse in one weekend and
institutions collapse in one weekend and President Obama who by the way was
President Obama who by the way was
President Obama who by the way was partly elected thanks to the we handle
partly elected thanks to the we handle
partly elected thanks to the we handle debt crisis told Congress that under no
debt crisis told Congress that under no
debt crisis told Congress that under no circumstance would taxpayer having to
circumstance would taxpayer having to
circumstance would taxpayer having to foot the bill and that now he wanted a
foot the bill and that now he wanted a
foot the bill and that now he wanted a regulation whereby the banks could
regulation whereby the banks could
regulation whereby the banks could actually resolve their own problem so
actually resolve their own problem so
actually resolve their own problem so needless to say what President Obama
needless to say what President Obama
needless to say what President Obama wanted to do was not totally at the
wanted to do was not totally at the
wanted to do was not totally at the taste of Wall Street and I remember
taste of Wall Street and I remember
taste of Wall Street and I remember Larry Summers that you might have heard
Larry Summers that you might have heard
Larry Summers that you might have heard about he was a secretary of the Treasury
about he was a secretary of the Treasury
about he was a secretary of the Treasury making a presentation saying now as
making a presentation saying now as
making a presentation saying now as regulators we will never assume that the
regulators we will never assume that the
regulators we will never assume that the bankers get it because they don’t we
bankers get it because they don’t we
bankers get it because they don’t we have been in crisis in 1966 every six
have been in crisis in 1966 every six
have been in crisis in 1966 every six years because of them now we have to
years because of them now we have to
years because of them now we have to frame them and that is how the financial
frame them and that is how the financial
frame them and that is how the financial system recovered until this guy came in
system recovered until this guy came in
system recovered until this guy came in you remember my great this is not a peep
you remember my great this is not a peep
you remember my great this is not a peep okay he came in with absolutely no idea
okay he came in with absolutely no idea
okay he came in with absolutely no idea what financial stability was with the
what financial stability was with the
what financial stability was with the assumption that banks were not prepared
assumption that banks were not prepared
assumption that banks were not prepared to lend money with the assumption that
to lend money with the assumption that
to lend money with the assumption that everybody was being cheated and that we
everybody was being cheated and that we
everybody was being cheated and that we had to let Wall Street so the market why
had to let Wall Street so the market why
had to let Wall Street so the market why not beautifully he was there and
not beautifully he was there and
not beautifully he was there and everybody said he has the recipe no more
everybody said he has the recipe no more
everybody said he has the recipe no more regulation except that the result of the
regulation except that the result of the
regulation except that the result of the situation was on the right side that
situation was on the right side that
situation was on the right side that over the last ten years the middle class
over the last ten years the middle class
over the last ten years the middle class had lost 40% of its wealth and one
had lost 40% of its wealth and one
had lost 40% of its wealth and one percent of the US population
percent of the US population
percent of the US population on 99% of the wealth doesn’t
on 99% of the wealth doesn’t
on 99% of the wealth doesn’t particularly care about that but what we
particularly care about that but what we
particularly care about that but what we are seeing happen is a situation where
are seeing happen is a situation where
are seeing happen is a situation where Goldman Sachs who by the way is
Goldman Sachs who by the way is
Goldman Sachs who by the way is everywhere there are at least five
everywhere there are at least five
everywhere there are at least five goldman sachs senior executives in the
goldman sachs senior executives in the
goldman sachs senior executives in the current administration Dolman Sachs said
current administration Dolman Sachs said
current administration Dolman Sachs said this is going to reduce the wealth of
this is going to reduce the wealth of
this is going to reduce the wealth of the bank’s by 250 billion they are not
the bank’s by 250 billion they are not
the bank’s by 250 billion they are not going to reduce their balance sheet so
going to reduce their balance sheet so
going to reduce their balance sheet so what is going to happen they will be
what is going to happen they will be
what is going to happen they will be weaker so we are going a road that we
weaker so we are going a road that we
weaker so we are going a road that we know is the road of the weakening of the
know is the road of the weakening of the
know is the road of the weakening of the financial sector and therefore what I’m
financial sector and therefore what I’m
financial sector and therefore what I’m trying to see here is that it is
trying to see here is that it is
trying to see here is that it is absolutely crucial that some resistance
absolutely crucial that some resistance
absolutely crucial that some resistance be met so that we keep the stability of
be met so that we keep the stability of
be met so that we keep the stability of the US banking especially because this
the US banking especially because this
the US banking especially because this is not about just the u.s. in Bothell
is not about just the u.s. in Bothell
is not about just the u.s. in Bothell some of you might have been in this
some of you might have been in this
some of you might have been in this lovely Swiss city they meet a record to
lovely Swiss city they meet a record to
lovely Swiss city they meet a record to try to stabilize the world but at the
try to stabilize the world but at the
try to stabilize the world but at the g20 the United States refused to sign a
g20 the United States refused to sign a
g20 the United States refused to sign a commitment to free trade so the world no
commitment to free trade so the world no
commitment to free trade so the world no longer knows whether it can count on the
longer knows whether it can count on the
longer knows whether it can count on the United States to continue maintaining
United States to continue maintaining
United States to continue maintaining financial stability and that is the
financial stability and that is the
financial stability and that is the biggest risk that we are seeing because
biggest risk that we are seeing because
biggest risk that we are seeing because those guys have been extraordinary
those guys have been extraordinary
those guys have been extraordinary rescuing the banking system over the
rescuing the banking system over the
rescuing the banking system over the last ten years by intervening those are
last ten years by intervening those are
last ten years by intervening those are the central bankers you have Janet
the central bankers you have Janet
the central bankers you have Janet Yellen from the Federal Reserve you have
Yellen from the Federal Reserve you have
Yellen from the Federal Reserve you have Mario Draghi
Mario Draghi
Mario Draghi from the European Central Bank and you
from the European Central Bank and you
from the European Central Bank and you have mr. Kuroda from the Bank of Japan
have mr. Kuroda from the Bank of Japan
have mr. Kuroda from the Bank of Japan together they have accumulated ten
together they have accumulated ten
together they have accumulated ten trillion dollars of additional assets
trillion dollars of additional assets
trillion dollars of additional assets which means they are ten trillion dollar
which means they are ten trillion dollar
which means they are ten trillion dollar less able to rescue the next crisis
less able to rescue the next crisis
less able to rescue the next crisis so we have the banks who are going to be
so we have the banks who are going to be
so we have the banks who are going to be deregulated the central banks who are
deregulated the central banks who are
deregulated the central banks who are less able to intervene but this is the
less able to intervene but this is the
less able to intervene but this is the most important message to you we have
most important message to you we have
most important message to you we have basically tried to resolve all our
basically tried to resolve all our
basically tried to resolve all our political and social problems by
political and social problems by
political and social problems by accumulating debt we are at a level
accumulating debt we are at a level
accumulating debt we are at a level where most of the countries have a debt
where most of the countries have a debt
where most of the countries have a debt that represent a hundred percent of what
that represent a hundred percent of what
that represent a hundred percent of what they earn in one year but more
they earn in one year but more
they earn in one year but more importantly and maybe that’s because I
importantly and maybe that’s because I
importantly and maybe that’s because I just got a new grandchild I would like
just got a new grandchild I would like
just got a new grandchild I would like to point you to the father and the two
to point you to the father and the two
to point you to the father and the two children saying someday this will be
children saying someday this will be
children saying someday this will be yours because it is yours you are
yours because it is yours you are
yours because it is yours you are entering a world where we our generation
entering a world where we our generation
entering a world where we our generation has basically wasted money created
has basically wasted money created
has basically wasted money created substantial climate problems and I have
substantial climate problems and I have
substantial climate problems and I have to tell you something you have to be
to tell you something you have to be
to tell you something you have to be fully awake so that we it doesn’t get
fully awake so that we it doesn’t get
fully awake so that we it doesn’t get worse and that measures are being taken
worse and that measures are being taken
worse and that measures are being taken because the politicians live on the
because the politicians live on the
because the politicians live on the four-year or five-year basis they don’t
four-year or five-year basis they don’t
four-year or five-year basis they don’t care about that
care about that
care about that for those who follow Chester day the
for those who follow Chester day the
for those who follow Chester day the presidential debate nobody talks about
presidential debate nobody talks about
presidential debate nobody talks about that this is the biggest threat at the
that this is the biggest threat at the
that this is the biggest threat at the moment and unless we have a serious
moment and unless we have a serious
moment and unless we have a serious reform of our society we will get very
reform of our society we will get very
reform of our society we will get very soon into either the Italian the Chinese
soon into either the Italian the Chinese
soon into either the Italian the Chinese or another systemic crisis and that’s
or another systemic crisis and that’s
or another systemic crisis and that’s what I want to avoid thank you very much
what I want to avoid thank you very much
what I want to avoid thank you very much [Applause]
”
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