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Treasury Secretary Henry Paulson, center, listens as President Bush, not pictured, makes a statement after meeting with G7 finance ministers about the financial crisis, Saturday, Oct. 11, 2008, in Washington. Pictured from left to right: Italy's central bank governor Mario Draghi; Eurogroup's Chairman Jean-Claude Juncker; Japan's Finance Minister Shoichi Nakagawa; Secretary of State Condoleezza Rice; Paulson; France Finance Minister Christine Lagarde; Canada Finance Minister James M. Flaherty, Britain's Chancellor of the Exchequer Alastair Darling, and Italy Finance Minister Giulio Tremonti. (AP Photo/Charles Dharapak)

Treasury Secretary Henry Paulson, center, listens as President Bush (not pictured) makes a statement after meeting with G7 finance ministers about the financial crisis on Saturday, Oct. 11, 2008, in Washington, DC. (AP)

Global giddiness to start this week, as stock markets right around the world bounced big steps back after days of paralyzing fear and panic — and global moves to coordinate massive measures to shore up beaten-down banks and finance.

The U.S. is right in the middle of the rescue moves. But is it in the lead anymore?

Loud voices from abroad have angrily blamed American-style economics for the crash of ’08, and promised the American era in world finance is over. That things will be different now.

What would that mean?

This hour, On Point: global financial crisis — and where Americans will stand when the dust settles.

You can join the conversation. When the great meltdown of ’08 is over, will America still be the “indispensible nation”? And will the U.S. be the one to set this right, or does tomorrow belong to Asia and Europe? Share your thoughts.

Guests:

Joining us from London is Daniel Hertzberg, deputy managing editor at The Wall Street Journal. He oversees the Journal’s Europe and Asia editions. In 1987, he shared both a Pulitzer Prize and the George Polk Award for coverage of the 1987 stock market crash.

Joining us from New York is Frederic Mishkin, a professor at Columbia University’s Graduate School of Business and an expert in economic crashes. Until August he was a member of the Board of Governors of the Federal Reserve. His most recent book is “The Next Great Globalization: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich” (2006).

And from Washington we’re joined by Eswar Prasad, professor of trade policy at Cornell University, research associate at the National Bureau of Economic Research, and a senior fellow for global economy and development at the Brookings Institution. He worked for 16 years at the International Monetary Fund, serving part of that time as head of the Financial Studies Division and the China Division.

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  • daniel carhart

    If these companies are too big to fail (too big a part of the economy…) could they be too big to exist?

  • jj

    At the end of the day..so much of this has depended upon the ability of American consumers/taxpayers to produce revenue streams..if usury laws had not been tossed out maybe banks would still care more about depositors than stockholders and mortgages would be manageable…

    If the American government had not INSISTED at the policy level that more people own homes..free markets with minimal intrusion might be better off as those who can only afford to rent are left alone.

    At some point the American taxpayer is going to be unable to pay off the national debt … our national mortgage

  • jeff

    I have a friend who works for Morgan Stanley.
    He has over 20 years in this company.
    He lost 90% of his retirement last week.
    20+ years down the drain.

    He is not a happy person right now and is in shock.
    He is over 50 so if he gets laid off he has to start over at that age.

    Something is wrong here, very wrong.

    Frederic Mishkin is not coming up with anything new.

    He’s part of the problem, and he’s teaching the next generation of MBA’s. You want to change the system –start with change the educators.

  • jj

    Also, why do we keep hearing about Medicare et.al as though they are optional expenses when the military budget weighs in at more than 30% of the pie and even more when you include Homeland Security. Do we really need such a massive defense machine? Doesn’t it perpetuate its own necessity?

  • Ray Mullineaux

    One of the program’s guests defended derivatives without ever explaining what functional value these instruments might have, merely saying we should preserve what was valuable about the innovation.

    Well, this person should provide an explanation of their value. If I had time to call, I would have asked that question.

  • Ed

    There has been a lot of talk about lessons learned but the biggest lesson to be learned is that regulation needs to be done pro-actively. Regulation need to keep pace with innovation instead of waiting for innovation to explode and pick up the pieces later. The demonization of all regulation by Republicans has created an atmosphere where people are unwilling to match the innovation in finance with innovation in regulation.

  • http://www.richardsnotes.org Richard

    The last caller had an important point which is not being addressed.

    Credit cards are a serious problem because they are virtual money. If people and/or banks had to have the money they are spending, they couldn’t spend it. This is the root of the problem and when you scale it up and abstract it even further by folding in mortgages it’s a huge mess.

    While virtual money makes the world go around it doesn’t seem like we’ve adapted very well to having it, both on an individual level and on an institutional level.

  • Lewis Woelk

    This was just another terrible show in a string of terrible shows you have done on the subject of the economic crisis. Your experts seem only to speaker in the jargon of the field of economics, and have no ability to relate to listeners in meaningful language.

    I have heard this topic handled in an excellent manner elsewhere on both NPR and PBS, but On Point can’t get it right, or even make sense of what is going on.

    We don’t need a discussion of the usefulness of derivative markets or short selling in India. I finally turned the show off after 45 minutes of frustration and won’t listen to another On Point show on this topic.

  • David Geschwind

    The effective way to regulate the markets would be to not allow people to make money on transaction costs. If the originators who wrote the loans that caused the trouble had been payed over the life of the loan then they would have been a lot more careful about the kind of loans they wrote. This applies to CEOs and boards also. This policy would also help end the distortion of the markets which has destroyed our manufacturing companies.

  • Barbara

    Please Mr. Ashbrook and On Point, devote an entire show to credit default swaps and CDOs. There is testimony taking place today on the crisis in front of the congressional ag committee. I saw some of it on C-Span before leaving for work and is available for viewing on their website. Please get guests like those testifying, Eric Dinallo, Dr. William Black. Also get Michael Greenberger who has been talking about these derivatives elsewhere on NPR.

    I don’t see how real confidence can be restored until these things are regulated properly.
    Thank you

  • A. Dunham, M.A.

    Great show. I urge you all to vote for Chuck Baldwin for President and send a message to the Globalist Elitists that Americans will not stand for a New World Order that takes our wealth and rights away and makes us have a chip implanted so we can be manipulated further. Video.google.com and key in “Russo New World Order” and you will understand that the housing bubble was created by the Federal Reserve and this “crisis” was planned as well. World financial leaders want more power, more money, and fewer people on earth. Stand with those who will not give up their liberties, such as the right to bear arms. We do not want the Amero. Vote out incumbents who support the NWO!

  • jeff

    Derivatives are the main reason we are in this mess.
    They are very dangerous and need to be regulated or removed form the market altogether.

    I agree that this show was kind useless in that it did not help the average listener, one such as myself, to understand nor to come to grips to the whys and how’s of this mess.

  • douglas may

    I listened with disbelief as your member of the FED said ” oops we got it wrong”
    a bit like the farmer finding out his hired hand is a fox in disguise as the hand says ” you’re down a few chickens…”
    you were way too easy on him, tom.
    Doug

  • F Y

    With the track record of the US, should we really need to worry about over-regulation to kill the derivative innovation, as repeatedly suggested by one panelist.

    Shouldn’t we, instead, worry about the political willpower gets diluted through persistent lobbying efforts that we end up with water-ed down version, a shadowy figure of better regulation ?

    Give me a break.

  • F Y

    What the American bailout efforts have shown us is that how friendly and supportive the US government is towards the Wall Street.

    1. The first try – $700b to buy all the junks from the banks with no equity stake.

    “If you can’t pay your house mortgage, let us take some of the junks from your basement, than giving us a partial ownership of the house”.

    2. The second try – $250b to buy equity stake (preferred shares – so it’s actually just buying bank debt, not equity). But it chose to ask for only 5% interest, and a small amount of warrant (15%) of the preferred share value.

    5%, are you kidding me ? The US government can borrow at 5%. Are these banks are as sound as the government ? [no pun intended!]

    The current going rate for similar deals (Warren Buffett w/ Goldman and Musubishi w/ Morgan Stanley) are 10% interest, plus warrants of 100% of the preferred shares. In Europe, the executives were sacked immediately.

    This is the business-friendliest government on earth. I predict in 5 years time, some watered down version of regulation will be passed. It would not look even remotely like what it should look like. The risk takers got their golden parachutes (bonus were already paid years back).

    The lesson ?

    For years, Wall Street plus some academic pundits told us they found a new fountain of wealth by securitizing and transferring risks to investors, than keeping them on their books. It made the US banking system safer, they said.

    Now we all know where the risks have been transferred to. That’s you and me – the tax payers, the public. It’s no magic at all – only a fairy tale that we should never have believed in.

  • Gregory Sinner

    to children@madison.k12.wi.us
    It was October 14th on cdos.
    My name is Gregory “Greg” Sinner
    my address is 1000 3rd St
    Baraboo WI 53913
    my social worker is Scott Ivanoski 608 524 7908
    my psychotherapist is Amy Peterson 608 524 7963
    the last time I worked was 1995.
    feel free to work on Babylon. I’m willing to share my toys.

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