1 00:00:02,720 --> 00:00:14,000 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:18,600 --> 00:00:21,799 Speaker 2: Hello and welcome to another episode of the All Thoughts Podcast. 3 00:00:21,920 --> 00:00:23,400 Speaker 2: I'm Tracy Alloway. 4 00:00:23,079 --> 00:00:24,880 Speaker 3: And I'm Joe. Wasn't thal Joe? 5 00:00:24,960 --> 00:00:26,520 Speaker 2: You know what sucks about getting old? 6 00:00:28,400 --> 00:00:28,720 Speaker 4: You know what? 7 00:00:28,760 --> 00:00:29,520 Speaker 1: I twisted him. 8 00:00:29,560 --> 00:00:32,519 Speaker 3: I hurt my neck the other day and I was like, 9 00:00:33,159 --> 00:00:35,159 Speaker 3: I said, you know, I was washing dishes and I 10 00:00:35,200 --> 00:00:37,000 Speaker 3: hurt my neck, And I said, getting old is such 11 00:00:37,000 --> 00:00:37,400 Speaker 3: a crime. 12 00:00:37,479 --> 00:00:37,919 Speaker 5: I hate it. 13 00:00:37,960 --> 00:00:38,800 Speaker 3: But what were you getting? 14 00:00:38,800 --> 00:00:40,480 Speaker 2: Where were you going to Well, I was going to say, 15 00:00:40,640 --> 00:00:44,680 Speaker 2: you start to lose shared experiences with a lot of people. 16 00:00:44,720 --> 00:00:47,360 Speaker 2: And I realized this whenever I make a Simpsons joke. 17 00:00:47,720 --> 00:00:49,159 Speaker 2: There are a lot of people now who do not 18 00:00:49,240 --> 00:00:53,400 Speaker 2: get that frame of reference. And I was thinking about 19 00:00:53,400 --> 00:00:57,000 Speaker 2: this in relation to the financial system, and specifically in 20 00:00:57,040 --> 00:00:59,720 Speaker 2: relation to the two thousand and eight financial crisis. 21 00:00:59,800 --> 00:01:01,760 Speaker 3: No, I've had this thought in the last year, which 22 00:01:01,800 --> 00:01:04,640 Speaker 3: is that we're at the point where the two thousand 23 00:01:04,640 --> 00:01:07,520 Speaker 3: and eight financial crisis is like capital age history. 24 00:01:07,760 --> 00:01:07,960 Speaker 4: Right. 25 00:01:08,280 --> 00:01:10,400 Speaker 3: It used to feel like when both of us started 26 00:01:10,400 --> 00:01:13,840 Speaker 3: our careers that the crisis in the aftermath was current events, 27 00:01:13,840 --> 00:01:18,400 Speaker 3: including several years in the aftermath. Now it's like when 28 00:01:18,440 --> 00:01:21,319 Speaker 3: I was a kid and I heard about Woodstock or 29 00:01:21,319 --> 00:01:23,759 Speaker 3: the moon landing stuff that really was not that long 30 00:01:23,800 --> 00:01:26,120 Speaker 3: before I was born or whatever. But I had you 31 00:01:26,160 --> 00:01:28,720 Speaker 3: know that, like various things when I was a kid, 32 00:01:28,760 --> 00:01:31,080 Speaker 3: could all have been the same year, the moon landing, 33 00:01:31,760 --> 00:01:34,960 Speaker 3: pro Harbor, etc. That was all just like capital age history. 34 00:01:35,280 --> 00:01:37,320 Speaker 3: And we're getting to the point now where the Great 35 00:01:37,360 --> 00:01:39,480 Speaker 3: Financial Crisis to a lot of people is just not 36 00:01:39,720 --> 00:01:42,600 Speaker 3: something that either feels relevant or anything except out of 37 00:01:42,680 --> 00:01:43,160 Speaker 3: history book. 38 00:01:43,240 --> 00:01:45,240 Speaker 2: That's right. And by the way, just to scare you 39 00:01:45,280 --> 00:01:48,560 Speaker 2: a little bit more, I asked perplexity how many Americans 40 00:01:48,560 --> 00:01:51,080 Speaker 2: were born after two thousand and eight, and it said 41 00:01:51,120 --> 00:01:56,000 Speaker 2: seventy millions. That's roughly twenty percent of the populations. 42 00:01:55,520 --> 00:01:57,640 Speaker 3: If you figure the people who are like under ten. Yeah, 43 00:01:57,680 --> 00:01:59,560 Speaker 3: before they know it's nothing to them either anyway. 44 00:02:00,120 --> 00:02:03,200 Speaker 2: Right, So obviously here at oddlots, we take our jobs 45 00:02:03,240 --> 00:02:07,400 Speaker 2: as lovers of financial crisis hindsight, and I guess purveyors 46 00:02:07,440 --> 00:02:11,800 Speaker 2: of financial records extremely serious. And so we should talk 47 00:02:11,960 --> 00:02:15,240 Speaker 2: about two thousand and eight. We should talk about financial crises. 48 00:02:15,400 --> 00:02:18,800 Speaker 2: They obviously still exist. We haven't had anything on the 49 00:02:18,800 --> 00:02:23,440 Speaker 2: scale of Lehman Brothers, but we've certainly had incidents like 50 00:02:23,520 --> 00:02:27,600 Speaker 2: the collapse of SVB. There's also that market sell off 51 00:02:27,760 --> 00:02:30,480 Speaker 2: in August which kind of came out of nowhere, a 52 00:02:30,480 --> 00:02:34,200 Speaker 2: bunch of people talking about the risks of the carry trade, 53 00:02:34,200 --> 00:02:37,720 Speaker 2: private credit. We have all these big worries stemming from 54 00:02:37,840 --> 00:02:40,519 Speaker 2: the amount of debt the US has to refinance to 55 00:02:41,120 --> 00:02:44,760 Speaker 2: really idiosyncratic things like the basis trade in US Treasury. 56 00:02:44,880 --> 00:02:47,480 Speaker 2: So we should talk about it. Let's do it, Okay, 57 00:02:47,520 --> 00:02:50,520 Speaker 2: So we really do have the perfect guest. We are 58 00:02:50,560 --> 00:02:54,679 Speaker 2: speaking with Tim Geitner, the former Treasury Secretary, former head 59 00:02:54,680 --> 00:02:57,120 Speaker 2: of the New York Fed, now at Warburg Pinkus, and 60 00:02:57,360 --> 00:03:01,120 Speaker 2: also chair of the Program on Financial Stability over at Yale, 61 00:03:01,160 --> 00:03:04,720 Speaker 2: which is why he's here today. The school is launching 62 00:03:04,760 --> 00:03:08,280 Speaker 2: something called the New Badget Project, which is an online 63 00:03:08,320 --> 00:03:13,600 Speaker 2: tool or compendium for designing financial crisis interventions. So Tim, 64 00:03:13,760 --> 00:03:14,680 Speaker 2: welcome to the show. 65 00:03:14,960 --> 00:03:16,000 Speaker 4: Nice to be with you both. 66 00:03:16,680 --> 00:03:19,400 Speaker 2: So, first of all, I got to ask, you know, 67 00:03:19,440 --> 00:03:22,160 Speaker 2: two hundred years ago, Walter Badget said that banks should 68 00:03:22,200 --> 00:03:25,240 Speaker 2: lend freely against good collateral and then there would be 69 00:03:25,280 --> 00:03:28,880 Speaker 2: no problems. So, you know, are we done here? Two 70 00:03:28,960 --> 00:03:30,919 Speaker 2: hundred years ago we should have had this figured out. 71 00:03:31,240 --> 00:03:34,880 Speaker 4: Yeah, I mean, financial crises have this classic tragic thing, 72 00:03:35,200 --> 00:03:38,400 Speaker 4: the crises of beliefs in a sense, and the crisis 73 00:03:38,440 --> 00:03:42,880 Speaker 4: of memory. And it's the loss of memory. It's the 74 00:03:42,920 --> 00:03:47,440 Speaker 4: absence of any personal experience with what happens when things 75 00:03:47,480 --> 00:03:51,320 Speaker 4: fall apart. It's the loss of memory about how panics 76 00:03:51,400 --> 00:03:56,280 Speaker 4: start and what it takes to break panics and prevent 77 00:03:56,360 --> 00:03:59,760 Speaker 4: panics from turning into great depressions, which is really what 78 00:04:00,720 --> 00:04:04,960 Speaker 4: financial it was. Minsky wrote that, you know, stability breeds instability, 79 00:04:05,160 --> 00:04:12,320 Speaker 4: so you have long periods of expansion, moderation and recessions 80 00:04:12,600 --> 00:04:17,360 Speaker 4: as prices going up, which creates the seeds for crisis, 81 00:04:17,920 --> 00:04:23,000 Speaker 4: causes memories to fade and allows these beliefs. There's some 82 00:04:23,080 --> 00:04:25,800 Speaker 4: a lot of folk wisdom in these things, beliefs that 83 00:04:25,880 --> 00:04:29,159 Speaker 4: get in the way of people doing what they have 84 00:04:29,240 --> 00:04:31,760 Speaker 4: to do in a crisis to prevent it from turning 85 00:04:31,760 --> 00:04:33,160 Speaker 4: into something catastrophic. 86 00:04:34,240 --> 00:04:39,320 Speaker 3: Do you believe that there could be some new academic like, Okay, 87 00:04:39,360 --> 00:04:42,880 Speaker 3: there's this new project. Can we actually escape this trap 88 00:04:42,920 --> 00:04:46,159 Speaker 3: of forgetting history? Is there any prospect for humanity to 89 00:04:46,279 --> 00:04:49,039 Speaker 3: avoid the endless cycle of forgetting? 90 00:04:49,720 --> 00:04:51,080 Speaker 4: You know, when I went to the New York fed 91 00:04:51,240 --> 00:04:54,080 Speaker 4: in two thousand and three, we were sort of in 92 00:04:54,120 --> 00:04:59,039 Speaker 4: the foothills of that long financial boom. I had spent 93 00:04:59,200 --> 00:05:03,560 Speaker 4: the previous eighteen years or fifteen years at the Treasury 94 00:05:03,560 --> 00:05:08,400 Speaker 4: and the IMF watching countries confront a whole range of 95 00:05:08,400 --> 00:05:11,600 Speaker 4: different financial crises, just not in the United States. And 96 00:05:11,960 --> 00:05:14,520 Speaker 4: there's lots of reasons why. Of course, there's lots of 97 00:05:14,560 --> 00:05:18,880 Speaker 4: parts of policy where the practice of policy, the design 98 00:05:18,960 --> 00:05:22,599 Speaker 4: of policy is short of the frontier of knowledge, and 99 00:05:22,720 --> 00:05:25,400 Speaker 4: closing that gap is a really important thing. If you 100 00:05:25,440 --> 00:05:29,200 Speaker 4: ask yourself, why is it in the graveyard of mistakes 101 00:05:29,480 --> 00:05:31,600 Speaker 4: the governments make of financial crisis? Why do they make 102 00:05:31,640 --> 00:05:36,920 Speaker 4: those mistakes? Sometimes just because the politics are incompatible with 103 00:05:37,000 --> 00:05:38,760 Speaker 4: what it takes to break a panic. You know, the 104 00:05:38,760 --> 00:05:42,000 Speaker 4: basic challenge, which is it looks like what you need 105 00:05:42,040 --> 00:05:44,279 Speaker 4: to break a panic or make people feel safe to 106 00:05:44,360 --> 00:05:47,480 Speaker 4: keep their deposits in a bank, looks like you're aiding 107 00:05:47,560 --> 00:05:51,640 Speaker 4: the arsenists, looks like you're rewarding the arsenists or the imprudent. 108 00:05:52,279 --> 00:05:54,320 Speaker 4: So there's a bunch of folk wisdom about that gets 109 00:05:54,320 --> 00:05:57,760 Speaker 4: in the way of doing the necessary thing quickly enough 110 00:05:57,760 --> 00:05:59,839 Speaker 4: to make a difference. But a lot of the gap 111 00:06:00,839 --> 00:06:03,039 Speaker 4: is because people don't know what to do because, as 112 00:06:03,080 --> 00:06:06,360 Speaker 4: I said earlier, because memory fades. So I think there's 113 00:06:06,760 --> 00:06:12,080 Speaker 4: a hugely compelling case for giving our successors a better 114 00:06:12,120 --> 00:06:15,320 Speaker 4: body of knowledge about what works and what doesn't so 115 00:06:15,360 --> 00:06:17,919 Speaker 4: they can act more quickly and be closer to the 116 00:06:17,920 --> 00:06:21,480 Speaker 4: frontier of good response more quickly. And that's the basic 117 00:06:21,560 --> 00:06:23,640 Speaker 4: case for what Andrew Metric and his colleagues had built 118 00:06:23,640 --> 00:06:24,000 Speaker 4: at Yale. 119 00:06:24,360 --> 00:06:27,560 Speaker 3: You know something, Tracy, one thing, just thinking about this, 120 00:06:28,000 --> 00:06:31,560 Speaker 3: it occurs to me twenty twenty when COVID hit. You know, 121 00:06:31,680 --> 00:06:33,680 Speaker 3: there were a lot of tools on the shelf developed 122 00:06:33,720 --> 00:06:35,599 Speaker 3: in two thousand and eight, two thousand and nine, and 123 00:06:35,640 --> 00:06:38,120 Speaker 3: it sounds like part of the idea is like, let's 124 00:06:38,120 --> 00:06:40,719 Speaker 3: actually make this a shelf, you know, like let's actually 125 00:06:40,720 --> 00:06:42,559 Speaker 3: like put that shelf out there. But it does seem 126 00:06:42,600 --> 00:06:44,919 Speaker 3: like that helped the rapidity of the twenty twenty response. 127 00:06:44,960 --> 00:06:47,760 Speaker 2: I was literally about to ask taking something off the 128 00:06:47,800 --> 00:06:51,400 Speaker 2: shelf question? Okay, but on this note, how important is 129 00:06:51,560 --> 00:06:54,480 Speaker 2: speed when you're fighting a financial crisis. Is it more 130 00:06:54,520 --> 00:06:58,560 Speaker 2: important to have an idea of exactly what you're going 131 00:06:58,640 --> 00:07:01,080 Speaker 2: to do or is it more important important to you know, 132 00:07:01,240 --> 00:07:06,240 Speaker 2: say whatever it takes allocation to fill out the details. 133 00:07:06,320 --> 00:07:08,200 Speaker 4: Later of course, you have to be able to make 134 00:07:08,240 --> 00:07:12,280 Speaker 4: the credible commitment that you will backstop the financial system 135 00:07:12,600 --> 00:07:15,760 Speaker 4: and make it safe to stay and to take risk again. 136 00:07:16,120 --> 00:07:17,960 Speaker 4: You have to be able to make that commitment credible. 137 00:07:18,280 --> 00:07:20,720 Speaker 4: But it's not enough to state it. People need to 138 00:07:20,760 --> 00:07:23,680 Speaker 4: see it. And how you design that mix of risk 139 00:07:23,720 --> 00:07:27,480 Speaker 4: sharing things that go way beyond badget is critical to 140 00:07:27,520 --> 00:07:30,800 Speaker 4: the efficacy and the credibility of the commitment. So I 141 00:07:30,800 --> 00:07:33,040 Speaker 4: think you're right though to say that if you look 142 00:07:33,080 --> 00:07:35,920 Speaker 4: back at that early weeks of the pandemic, it was 143 00:07:36,080 --> 00:07:39,480 Speaker 4: hugely valuable that a bunch of people around the table 144 00:07:39,520 --> 00:07:43,800 Speaker 4: then were around the table in seven and eight, and 145 00:07:43,840 --> 00:07:47,920 Speaker 4: that memory of what might work was still alive and 146 00:07:48,000 --> 00:07:52,360 Speaker 4: they could draw from a set of cases examples and 147 00:07:52,720 --> 00:07:55,120 Speaker 4: move more quickly to put them in place. But there 148 00:07:55,160 --> 00:07:57,720 Speaker 4: is a huge value to speed when you're at the 149 00:07:57,840 --> 00:08:01,320 Speaker 4: edge of panic. You know, it's like the classic thing, 150 00:08:01,360 --> 00:08:06,440 Speaker 4: These happen very slowly and then way quickly, and you 151 00:08:06,480 --> 00:08:09,000 Speaker 4: don't know what the margin is for something that is 152 00:08:09,240 --> 00:08:13,480 Speaker 4: like burning slowly turning into something that's catastrophic, and so 153 00:08:13,520 --> 00:08:15,520 Speaker 4: you need to be able to move very very quickly. 154 00:08:15,520 --> 00:08:18,600 Speaker 4: And again, one of the barriers moving quickly there's lots 155 00:08:18,600 --> 00:08:20,880 Speaker 4: of barriers. One of the bearers moving quickly is when 156 00:08:20,880 --> 00:08:25,920 Speaker 4: people are not really sure because they hadn't lived it. 157 00:08:26,160 --> 00:08:28,720 Speaker 4: There's no people around them in the institution or they're 158 00:08:28,760 --> 00:08:31,480 Speaker 4: coming into who have any knowledge of it. When I 159 00:08:31,480 --> 00:08:33,040 Speaker 4: went to the New York FED, I remember initially they 160 00:08:33,080 --> 00:08:35,960 Speaker 4: had something they called the Doomsday Book. And the Doomsday 161 00:08:35,960 --> 00:08:39,719 Speaker 4: Book was the comprehensive set of precedent of what the 162 00:08:39,760 --> 00:08:42,960 Speaker 4: New York Fed had done in the decades since the 163 00:08:43,000 --> 00:08:46,480 Speaker 4: Great Depression. How it was, and I was quite eager 164 00:08:46,520 --> 00:08:49,560 Speaker 4: to see this book, and it was a quite fat book. 165 00:08:49,600 --> 00:08:52,520 Speaker 4: But what was remarkable about the book was in those 166 00:08:52,520 --> 00:08:55,480 Speaker 4: decades between the Great Depression and two thousand and seven, 167 00:08:56,200 --> 00:08:59,880 Speaker 4: the things the US had to deal with were relatively modest, 168 00:09:00,840 --> 00:09:04,440 Speaker 4: nothing like the classic systemic financial crisis, and so that 169 00:09:05,080 --> 00:09:10,439 Speaker 4: body of precedent was of limited value. And you could 170 00:09:10,480 --> 00:09:12,600 Speaker 4: have people sitting around the table saying, but what we 171 00:09:12,640 --> 00:09:16,120 Speaker 4: should do what Sweden did, or not do what Japan did, 172 00:09:16,200 --> 00:09:17,720 Speaker 4: or we help people have all these debates, but if 173 00:09:17,720 --> 00:09:20,559 Speaker 4: you ask them what did Sweden actually do? There was 174 00:09:20,600 --> 00:09:22,520 Speaker 4: no knowledge of that, and you know, you could you 175 00:09:22,559 --> 00:09:24,880 Speaker 4: could spend your time calling the person in Sweden who 176 00:09:24,880 --> 00:09:26,560 Speaker 4: had done that. But that takes some time. 177 00:09:26,760 --> 00:09:28,760 Speaker 3: It's so funny because now I have this memory and 178 00:09:28,800 --> 00:09:31,000 Speaker 3: I totally forgot it. I was a business insider at 179 00:09:31,000 --> 00:09:32,880 Speaker 3: the time, and people are like, oh, the Swedish model 180 00:09:32,880 --> 00:09:35,680 Speaker 3: of bailouds, and people were like debating this, and I 181 00:09:35,720 --> 00:09:37,280 Speaker 3: was like, I have no idea what this is. I mean, 182 00:09:37,360 --> 00:09:40,960 Speaker 3: I saw that term the Swedish model of Baylouds dozens 183 00:09:41,040 --> 00:09:43,800 Speaker 3: or hundreds of times, the number of times I actually 184 00:09:43,840 --> 00:09:47,120 Speaker 3: read something with some substantive you know you mentioned but 185 00:09:47,320 --> 00:09:49,480 Speaker 3: between the Great Depression and the Great Financial Crisis, we 186 00:09:49,480 --> 00:09:51,320 Speaker 3: didn't really have to deal with too much. But there 187 00:09:51,360 --> 00:09:54,880 Speaker 3: were a few There were continental Illinois in nineteen eighty four. 188 00:09:54,960 --> 00:09:59,280 Speaker 3: Could those have gotten really bad and become financial crisis 189 00:09:59,320 --> 00:10:01,280 Speaker 3: like events had intervention been slower? 190 00:10:02,120 --> 00:10:04,800 Speaker 4: I don't think that you had that mix of factors 191 00:10:04,800 --> 00:10:07,839 Speaker 4: then that the type of dry tender, the left of 192 00:10:07,960 --> 00:10:11,040 Speaker 4: vulnerable that why was that? You know, part of what 193 00:10:11,120 --> 00:10:13,480 Speaker 4: makes you vulnerable to a classic panic is when the 194 00:10:13,559 --> 00:10:17,520 Speaker 4: economy as a whole is so imbalanced, people have borrowed 195 00:10:17,559 --> 00:10:20,160 Speaker 4: too much relative to income. There's a whole set of 196 00:10:20,160 --> 00:10:23,560 Speaker 4: expectations that go into leverage and behavior based on a 197 00:10:23,600 --> 00:10:26,800 Speaker 4: long period of rising house prices or acid prices, and 198 00:10:26,840 --> 00:10:29,000 Speaker 4: you didn't have this period we called the Great moderation 199 00:10:29,160 --> 00:10:32,839 Speaker 4: where people get used to the expectation that recessions we 200 00:10:32,880 --> 00:10:36,760 Speaker 4: would be short and shallow, and that equity price readjustments 201 00:10:36,760 --> 00:10:40,200 Speaker 4: you could call them, wouldn't cascade into something dangerous. So 202 00:10:40,320 --> 00:10:43,000 Speaker 4: you need a long period for the economy to get 203 00:10:43,160 --> 00:10:46,080 Speaker 4: way out of balance, which was true in seven. It 204 00:10:46,160 --> 00:10:49,559 Speaker 4: was also true that in the decades after the Great Depression, 205 00:10:50,240 --> 00:10:54,480 Speaker 4: the financialism outgrew the banking system and outgrew the protections 206 00:10:54,520 --> 00:10:57,960 Speaker 4: in place around the banking system to prevent excess leverage 207 00:10:58,120 --> 00:11:01,640 Speaker 4: and runs. In our system. This is a very important 208 00:11:01,679 --> 00:11:04,640 Speaker 4: thing to remember, is that in our system in seven, 209 00:11:05,080 --> 00:11:07,559 Speaker 4: you had a banking system which obviously did not have 210 00:11:07,679 --> 00:11:11,240 Speaker 4: enough capital to withstand a terrible recession. But the more 211 00:11:11,240 --> 00:11:13,400 Speaker 4: consequential risk for the system was you had a non 212 00:11:13,400 --> 00:11:16,840 Speaker 4: bank financial system with a set of investment banks and 213 00:11:17,120 --> 00:11:19,720 Speaker 4: non bank financial institutions like ge capital letters, and a 214 00:11:19,720 --> 00:11:22,960 Speaker 4: whole bunch of funding vehicles that had classic bank type 215 00:11:23,000 --> 00:11:24,880 Speaker 4: run risk, that were able to run with a huge 216 00:11:24,880 --> 00:11:27,520 Speaker 4: amount of leverage because people had thought the last decades 217 00:11:27,640 --> 00:11:30,240 Speaker 4: suggest the future would be A nine, and so that 218 00:11:30,760 --> 00:11:35,079 Speaker 4: mix of factors, a more unbalanced economy with a financial 219 00:11:35,120 --> 00:11:37,920 Speaker 4: system very vulnerable to runs took a long time to 220 00:11:38,000 --> 00:11:39,679 Speaker 4: build up, and I don't think we had that mix 221 00:11:39,720 --> 00:11:40,880 Speaker 4: of factors until O seven. 222 00:11:56,760 --> 00:11:58,600 Speaker 2: So one of the big debates when it comes to 223 00:11:58,640 --> 00:12:03,959 Speaker 2: financial stability is whether emergency funding should be directed at 224 00:12:04,200 --> 00:12:08,960 Speaker 2: people versus financial institutions. So how do you think about 225 00:12:09,280 --> 00:12:13,719 Speaker 2: bailing out banks versus maybe bailing out consumers, helping them 226 00:12:13,720 --> 00:12:17,640 Speaker 2: to pay their mortgage, helping them to survive through the pandemic. 227 00:12:18,280 --> 00:12:21,440 Speaker 2: Is that better than underwriting bad assets at a bank 228 00:12:21,520 --> 00:12:22,800 Speaker 2: or a shadow bank, for instance. 229 00:12:22,920 --> 00:12:26,160 Speaker 4: Yeah, excellent question, And they really are not. You can't 230 00:12:26,160 --> 00:12:29,200 Speaker 4: think of them as choices, because there is no credible 231 00:12:29,240 --> 00:12:31,920 Speaker 4: response to a financial crisis that does not come with 232 00:12:32,280 --> 00:12:34,640 Speaker 4: a huge amount what we might call a classic Knesyan 233 00:12:35,400 --> 00:12:40,240 Speaker 4: direct support to households, stay in local governments, and to 234 00:12:40,320 --> 00:12:44,040 Speaker 4: business in some way. And you can figure out your 235 00:12:44,080 --> 00:12:47,560 Speaker 4: financial system stuff and do that, well, it will not 236 00:12:47,760 --> 00:12:51,040 Speaker 4: be sufficient because you need to use that massive Knesyan 237 00:12:52,000 --> 00:12:55,320 Speaker 4: arsenal of force to help take out some of the 238 00:12:55,400 --> 00:12:59,040 Speaker 4: risk of the acute recession. But it's also true that 239 00:12:59,160 --> 00:13:02,319 Speaker 4: doing the Canesy stuff is not sufficient. No economy can 240 00:13:02,360 --> 00:13:05,280 Speaker 4: survive the collapse of the banking system. And the only 241 00:13:05,360 --> 00:13:07,240 Speaker 4: way to prevent the collapse of a banking system or 242 00:13:07,280 --> 00:13:11,559 Speaker 4: a financial system is to guarantee deposits, lend freely against collateral, 243 00:13:11,600 --> 00:13:15,480 Speaker 4: to solve institutions, and sometimes to recapitalize the banking system. 244 00:13:15,679 --> 00:13:18,000 Speaker 4: So they are necessary things that go together, and it 245 00:13:18,040 --> 00:13:20,040 Speaker 4: would be a mistake to try one with out of 246 00:13:20,040 --> 00:13:22,360 Speaker 4: the other. And if you look back, and this is 247 00:13:22,400 --> 00:13:24,000 Speaker 4: the right way to look back, and you know, part 248 00:13:24,040 --> 00:13:26,240 Speaker 4: of what Andrew metro good esteem it built at Yale 249 00:13:26,280 --> 00:13:30,679 Speaker 4: is just to try to do a careful, analytical, dispassionate 250 00:13:31,280 --> 00:13:35,120 Speaker 4: look back at mistakes and lessons and choices. And it 251 00:13:35,200 --> 00:13:38,600 Speaker 4: is absolutely fair to say that the US as a 252 00:13:38,640 --> 00:13:42,040 Speaker 4: political system, as a country did not do enough of 253 00:13:42,080 --> 00:13:45,960 Speaker 4: the classic kainsy and fiscal response early enough and sustained 254 00:13:46,080 --> 00:13:49,600 Speaker 4: enough to complement the things we did to prevent the 255 00:13:49,640 --> 00:13:51,160 Speaker 4: collapse of the financial system. 256 00:13:52,200 --> 00:13:54,240 Speaker 3: One of the things that we've sort of realized during 257 00:13:54,280 --> 00:13:56,840 Speaker 3: the podcast over the years is that even like a 258 00:13:56,880 --> 00:13:59,760 Speaker 3: story like the Great Financial Crisis in eight two thousand 259 00:13:59,760 --> 00:14:01,920 Speaker 3: and nine, people are still debating it. You know, people 260 00:14:01,920 --> 00:14:05,600 Speaker 3: are still debating why and what actually was the cause. 261 00:14:05,679 --> 00:14:08,520 Speaker 3: And you still get people who say things like, you know, 262 00:14:08,600 --> 00:14:10,920 Speaker 3: actually some prime really wasn't that big and that actually 263 00:14:10,960 --> 00:14:12,800 Speaker 3: was not as crazy as it sounded when it was 264 00:14:12,840 --> 00:14:14,880 Speaker 3: asserted at the time. And it's like, actually, you know, 265 00:14:14,960 --> 00:14:17,000 Speaker 3: the issue was like it was all those like yield 266 00:14:17,040 --> 00:14:20,120 Speaker 3: hungry German land banks and stuff like that. I'm curious 267 00:14:20,160 --> 00:14:22,560 Speaker 3: just for you, like you know, seventeen years later or 268 00:14:22,600 --> 00:14:25,960 Speaker 3: whatever other things that you've changed or not in like 269 00:14:26,120 --> 00:14:28,880 Speaker 3: necessarily the response, but when you think back, it like 270 00:14:29,040 --> 00:14:32,320 Speaker 3: causes that like you see in a different light today 271 00:14:32,360 --> 00:14:33,320 Speaker 3: than you did at the time. 272 00:14:34,120 --> 00:14:37,200 Speaker 4: No, I mean you should never say no obviously, you 273 00:14:37,200 --> 00:14:39,560 Speaker 4: should look fresh at these things all the time. 274 00:14:40,240 --> 00:14:42,920 Speaker 3: Or is there any conventional wisdom from the time that 275 00:14:43,000 --> 00:14:46,000 Speaker 3: you don't think has stood up as well as maybe. 276 00:14:46,000 --> 00:14:49,120 Speaker 4: I think during the endurant debate everyone has still has. 277 00:14:49,440 --> 00:14:52,600 Speaker 4: Is is a good debate to have, which is a 278 00:14:52,720 --> 00:14:56,400 Speaker 4: version of your question, Tracy, which is that but couldn't 279 00:14:56,400 --> 00:15:00,680 Speaker 4: we have done more for the individual? And shouldn't we 280 00:15:00,720 --> 00:15:02,880 Speaker 4: have done more for the individual? And wouldn't have been 281 00:15:03,680 --> 00:15:08,280 Speaker 4: more effective and less damaging? And absolutely that's the right 282 00:15:08,360 --> 00:15:10,920 Speaker 4: question and the fiscal response of the US and the 283 00:15:10,960 --> 00:15:14,760 Speaker 4: pandemic is just a good counter example. There's a good 284 00:15:14,800 --> 00:15:16,920 Speaker 4: set of arguments that we overdid it in the pandemic, 285 00:15:17,440 --> 00:15:20,640 Speaker 4: but the speed and the mix and the overall force 286 00:15:20,760 --> 00:15:24,520 Speaker 4: and the composition of the fiscal policy measure put in place, 287 00:15:24,520 --> 00:15:26,360 Speaker 4: they're a good counter example. And I think that is 288 00:15:26,400 --> 00:15:28,360 Speaker 4: a very good lesson. Of course, you don't want to 289 00:15:28,360 --> 00:15:30,120 Speaker 4: be like you know, you don't want to overlearn your 290 00:15:30,160 --> 00:15:32,840 Speaker 4: lessons of these things. I think the other big lesson, 291 00:15:32,880 --> 00:15:34,800 Speaker 4: of course is and we've talked about this is just 292 00:15:34,880 --> 00:15:38,080 Speaker 4: again that you know, we were as a country, we 293 00:15:38,080 --> 00:15:41,960 Speaker 4: were late to escalate on the purely financial dimensions of 294 00:15:42,000 --> 00:15:44,280 Speaker 4: the crisis. And part of that was because, as we 295 00:15:44,320 --> 00:15:46,720 Speaker 4: talked before, people had no memory of what it takes, 296 00:15:46,760 --> 00:15:48,120 Speaker 4: and people would debate where we're going to have a 297 00:15:48,120 --> 00:15:49,640 Speaker 4: crisis for a long period of time, and that got 298 00:15:49,680 --> 00:15:52,600 Speaker 4: the way of speed. But probably because in our system 299 00:15:52,640 --> 00:15:54,520 Speaker 4: a lot of the very powerful thing is run through 300 00:15:54,520 --> 00:15:57,520 Speaker 4: the Congress and that it takes some time, and normally 301 00:15:57,520 --> 00:16:00,800 Speaker 4: in our system and uniquely our system in some ways 302 00:16:00,840 --> 00:16:03,160 Speaker 4: because of the checks and balances, things have to feel 303 00:16:03,240 --> 00:16:06,440 Speaker 4: terrible before you can shake the Congress into action. 304 00:16:06,640 --> 00:16:09,120 Speaker 2: Things have to feel like issues that people will actually 305 00:16:09,240 --> 00:16:12,680 Speaker 2: vote on Okay, So how do you actually judge the 306 00:16:12,720 --> 00:16:16,240 Speaker 2: success of a financial crisis intervention? Because this seems to 307 00:16:16,240 --> 00:16:19,320 Speaker 2: me to be the real difficulty here. So you're trying 308 00:16:19,360 --> 00:16:23,120 Speaker 2: to prove that the counterfactual would have been worse exactly, 309 00:16:23,200 --> 00:16:27,120 Speaker 2: and that's probably impossible. So how do you go about 310 00:16:27,160 --> 00:16:30,360 Speaker 2: thinking of this was good, this was successful, versus we 311 00:16:30,400 --> 00:16:33,080 Speaker 2: should have done this, this was a total failure, et cetera. 312 00:16:33,480 --> 00:16:35,480 Speaker 4: Yeah, there's a bunch of different measures you can use, 313 00:16:35,520 --> 00:16:37,640 Speaker 4: and of course none of them are perfect. One is 314 00:16:37,720 --> 00:16:40,160 Speaker 4: you could look at the quality of the macroeconomic outcomes 315 00:16:40,320 --> 00:16:43,440 Speaker 4: relative to past crises, and it's not a great comparison. 316 00:16:43,440 --> 00:16:45,840 Speaker 4: It seems like a low bar. But the classic comparison 317 00:16:45,920 --> 00:16:48,880 Speaker 4: is to say what was the depth of the recession? 318 00:16:49,000 --> 00:16:52,120 Speaker 4: Is duration? And what was the path of growth in 319 00:16:52,160 --> 00:16:57,400 Speaker 4: the US in this experience relative to two things, two compartors. 320 00:16:57,480 --> 00:17:00,080 Speaker 4: One is the great depression. We're unemployment p tw twenty 321 00:17:00,120 --> 00:17:02,320 Speaker 4: five percent and you had like a decade of negative 322 00:17:02,360 --> 00:17:05,040 Speaker 4: if not, you know, terrible growth outcomes. And the other 323 00:17:05,080 --> 00:17:08,280 Speaker 4: comparison is to look at the other major economies that 324 00:17:08,320 --> 00:17:10,560 Speaker 4: went through this crisis and what were those outcomes in 325 00:17:10,640 --> 00:17:16,320 Speaker 4: terms of basic thing, depth of recession, speed of recovery, 326 00:17:17,119 --> 00:17:20,959 Speaker 4: rise in unemployment, loss of income, loss of wealth. And 327 00:17:21,280 --> 00:17:24,600 Speaker 4: those are not perfect comparisons, because everything is different, but 328 00:17:24,640 --> 00:17:26,719 Speaker 4: I think they're pretty good comparisons. And I think that 329 00:17:27,160 --> 00:17:30,159 Speaker 4: there's a bunch of arguments that and Ben BERNANKI knows, 330 00:17:30,200 --> 00:17:33,040 Speaker 4: were written about this, that the size of the shock 331 00:17:33,680 --> 00:17:36,520 Speaker 4: that precipitated the crisis of seven o eight was larger 332 00:17:36,560 --> 00:17:41,000 Speaker 4: than at the beginnings of the Great Depression. And I 333 00:17:41,040 --> 00:17:45,600 Speaker 4: think by that measure, us outcomes were dramatically better. Our 334 00:17:45,640 --> 00:17:48,480 Speaker 4: outcomes were also significantly better than those of any other 335 00:17:48,520 --> 00:17:52,159 Speaker 4: major economy went through the crisis. And I said, you know, 336 00:17:52,200 --> 00:17:55,040 Speaker 4: we made a bunch of mistakes. We were short of 337 00:17:55,119 --> 00:17:57,919 Speaker 4: the frontier of what was possible, we were late to escalate, 338 00:17:57,960 --> 00:17:59,840 Speaker 4: didn't do enough fiscal So I think we should look 339 00:17:59,840 --> 00:18:03,520 Speaker 4: at those things with open eyes. But on those two measures, 340 00:18:03,560 --> 00:18:06,000 Speaker 4: I think that the quality of the choices we ultimately 341 00:18:06,080 --> 00:18:09,360 Speaker 4: made were quite good. There's one other thing you can 342 00:18:09,400 --> 00:18:14,760 Speaker 4: look at, which is what is the health of the 343 00:18:14,840 --> 00:18:18,040 Speaker 4: system that emerges from the ashes of the crisis, what's 344 00:18:18,080 --> 00:18:20,159 Speaker 4: the quality of the reforms that are put in place? 345 00:18:20,840 --> 00:18:23,479 Speaker 4: And I think if you look at again, these are 346 00:18:23,520 --> 00:18:27,400 Speaker 4: imperfect things. You can't per comparisons, but you know, our 347 00:18:27,480 --> 00:18:32,480 Speaker 4: system emerged with much more capital than the peers of 348 00:18:32,560 --> 00:18:35,800 Speaker 4: the major US institutions. Therefore, we had a much more 349 00:18:35,840 --> 00:18:40,280 Speaker 4: resilient system and I think a system able to help 350 00:18:40,359 --> 00:18:43,760 Speaker 4: finance at more rapid recovery. It was from many other countries, 351 00:18:44,080 --> 00:18:45,960 Speaker 4: and I think we were able to still preserve a 352 00:18:46,000 --> 00:18:48,480 Speaker 4: system which is still I think best in the world 353 00:18:48,760 --> 00:18:51,760 Speaker 4: at channeling capital. People have had a good idea and 354 00:18:51,840 --> 00:18:55,960 Speaker 4: the wave of innovation, massive innovation we've seen in the 355 00:18:56,040 --> 00:19:00,399 Speaker 4: US economy in a decade since, and it's relative situation 356 00:19:00,440 --> 00:19:02,239 Speaker 4: in the United States is partly a function of the 357 00:19:02,280 --> 00:19:06,320 Speaker 4: fact that we were able to repair the damage onto 358 00:19:06,400 --> 00:19:09,840 Speaker 4: this system relatively quickly and put in place a set 359 00:19:09,880 --> 00:19:14,320 Speaker 4: of institutions and waste of fun, good ideas that still 360 00:19:14,359 --> 00:19:15,560 Speaker 4: remains the envy of the world. 361 00:19:15,760 --> 00:19:17,879 Speaker 3: It's interesting. Tracy and I have done like tons of 362 00:19:17,920 --> 00:19:21,600 Speaker 3: episodes on like how the financial system has changed post 363 00:19:21,640 --> 00:19:24,000 Speaker 3: Dodd Frank and we've talked a lot about multi strategy 364 00:19:24,040 --> 00:19:27,080 Speaker 3: hedge funds and private credit, et cetera. And we could 365 00:19:27,119 --> 00:19:30,240 Speaker 3: all come up in our minds with scenarios we're all 366 00:19:30,320 --> 00:19:32,840 Speaker 3: that good's bad because right it's easy to come up with, 367 00:19:33,040 --> 00:19:35,800 Speaker 3: but a lot of times that walk away from those conversations. 368 00:19:35,800 --> 00:19:37,720 Speaker 3: It's like, h seems like a lot of risk taking 369 00:19:38,040 --> 00:19:42,480 Speaker 3: activity has in fact moved away from deposit taking institutions, 370 00:19:42,720 --> 00:19:46,240 Speaker 3: but the deposit taking institutions still have function. I mean, 371 00:19:46,320 --> 00:19:48,720 Speaker 3: like I I don't want Jink said, but it does 372 00:19:48,800 --> 00:19:52,240 Speaker 3: seem like the financial system that exists today to some 373 00:19:52,440 --> 00:19:55,720 Speaker 3: extent is the financial system that was conceived of with 374 00:19:55,840 --> 00:19:56,359 Speaker 3: Dodd Frank. 375 00:19:57,720 --> 00:19:59,960 Speaker 4: Yeah. Of course, as you said, you want to always 376 00:19:59,960 --> 00:20:04,400 Speaker 4: be careful, and because you won't know until you have 377 00:20:04,520 --> 00:20:07,840 Speaker 4: the more exacting test of resilience, and the more exacting 378 00:20:07,880 --> 00:20:12,600 Speaker 4: test of resilience is a severe recession that starts outside 379 00:20:12,600 --> 00:20:15,280 Speaker 4: the system, not within the financial system, and we haven't 380 00:20:15,640 --> 00:20:17,679 Speaker 4: really had that test yet, and the pandemic was not 381 00:20:17,720 --> 00:20:20,000 Speaker 4: a perfect test of that system, so we won't really know. 382 00:20:20,520 --> 00:20:23,240 Speaker 4: But I think you're right to say that the system 383 00:20:23,280 --> 00:20:27,720 Speaker 4: as it looks today has a banking system which has 384 00:20:27,760 --> 00:20:32,359 Speaker 4: more capital, better set of protections around it, and the 385 00:20:32,440 --> 00:20:36,880 Speaker 4: non bank system has more stable foundations. You know, it's 386 00:20:36,680 --> 00:20:40,120 Speaker 4: it's it's a system where the credit that comes outside 387 00:20:40,160 --> 00:20:46,440 Speaker 4: the banking system is in relatively stronger hands, less leverage 388 00:20:46,640 --> 00:20:49,919 Speaker 4: less run risk. Now, of course there will be some 389 00:20:50,040 --> 00:20:52,760 Speaker 4: sadness and there will be some pain, and people will 390 00:20:52,760 --> 00:20:55,399 Speaker 4: lose some money, and there will be some failure in 391 00:20:55,440 --> 00:20:57,840 Speaker 4: even modern shocks in this system. But that's the way 392 00:20:57,840 --> 00:20:59,760 Speaker 4: the system should work. The test of a system is 393 00:21:00,000 --> 00:21:03,080 Speaker 4: think Larry Summers said it should be safe for failure. 394 00:21:03,680 --> 00:21:06,919 Speaker 4: And you want to build a system that is not 395 00:21:07,119 --> 00:21:11,440 Speaker 4: prevents failure or where failures inconceivable, but where it's safe 396 00:21:11,480 --> 00:21:13,280 Speaker 4: for failure, and that meaning you can allow a fair 397 00:21:13,320 --> 00:21:15,199 Speaker 4: amount of failure to happen without needing to do the 398 00:21:15,240 --> 00:21:18,120 Speaker 4: massive escalation that we had to do in that crisis. 399 00:21:18,880 --> 00:21:22,640 Speaker 2: So, speaking of banking reform and DoD Frank and capital, 400 00:21:22,680 --> 00:21:25,240 Speaker 2: I wanted to ask you about Basil because in the 401 00:21:25,240 --> 00:21:30,000 Speaker 2: aftermath of the financial crisis, Basil was this huge, huge conversation, 402 00:21:30,400 --> 00:21:32,679 Speaker 2: and if you wanted to do something or change something, 403 00:21:32,720 --> 00:21:35,560 Speaker 2: you had to get all these different countries to come 404 00:21:35,600 --> 00:21:38,680 Speaker 2: in and agree on that specific thing, all these different 405 00:21:38,760 --> 00:21:42,880 Speaker 2: policy makers. Fast forward to today. I'm going to try 406 00:21:42,920 --> 00:21:45,600 Speaker 2: to put this diplomatically, but it seems like the US 407 00:21:45,960 --> 00:21:49,400 Speaker 2: is kind of going its own way in many respects. 408 00:21:49,960 --> 00:21:51,560 Speaker 2: Does Basil matter anymore? 409 00:21:51,960 --> 00:21:56,199 Speaker 4: You know, we have a relatively integrated global financial system, 410 00:21:56,960 --> 00:22:00,400 Speaker 4: so it is very important there to be a sort 411 00:22:00,440 --> 00:22:05,040 Speaker 4: of common floor to govern and regulate at least what 412 00:22:05,119 --> 00:22:07,280 Speaker 4: the major banks do that operate across the system. That's 413 00:22:07,280 --> 00:22:09,040 Speaker 4: a hugely valuable thing, and one of the great things 414 00:22:09,080 --> 00:22:12,400 Speaker 4: that was done in the early nineties was that initial 415 00:22:12,440 --> 00:22:16,359 Speaker 4: wave of setting of norms and standards. Very valuable. Of course, 416 00:22:16,359 --> 00:22:18,439 Speaker 4: you want that floor to be set at a reasonably 417 00:22:18,480 --> 00:22:23,000 Speaker 4: conservative level, not easily eroded over time, but countries should 418 00:22:23,000 --> 00:22:25,680 Speaker 4: be free to go beyond that. And you might look 419 00:22:25,720 --> 00:22:28,680 Speaker 4: at that, as we all did in the mid two 420 00:22:28,720 --> 00:22:31,520 Speaker 4: thousands and afterwards, and say that floor was set too low, 421 00:22:31,560 --> 00:22:33,440 Speaker 4: and you want to raise the floor. And you don't 422 00:22:33,480 --> 00:22:36,760 Speaker 4: need to let the requirements of consensus or the long 423 00:22:36,960 --> 00:22:40,040 Speaker 4: or global negotiations get the way of countries deciding they 424 00:22:40,080 --> 00:22:43,280 Speaker 4: want to be more conservative. And we were more conservative 425 00:22:43,320 --> 00:22:45,680 Speaker 4: in some ways. But anyway, I think it's a valuable 426 00:22:45,680 --> 00:22:47,959 Speaker 4: framework and we should want to protect and preserve it, 427 00:22:48,280 --> 00:22:51,840 Speaker 4: but always look at it fresh and careful and understand that, 428 00:22:52,320 --> 00:22:55,080 Speaker 4: you know, the fundamental challenge and design of these safeguards 429 00:22:55,119 --> 00:22:59,680 Speaker 4: is that you're going to create incentives for arbitrage, and 430 00:23:00,400 --> 00:23:04,159 Speaker 4: you're going to create if you make the banking system safe, 431 00:23:05,200 --> 00:23:07,120 Speaker 4: you're going to make it more economic for a whole 432 00:23:07,160 --> 00:23:09,919 Speaker 4: bunch of risk to move outside the banking system, and 433 00:23:10,000 --> 00:23:12,480 Speaker 4: you might leave yourself with a system where the banks 434 00:23:12,520 --> 00:23:15,480 Speaker 4: look less likely to fail, but the system is more unstable, 435 00:23:16,000 --> 00:23:17,639 Speaker 4: and that's the system thing you want to avoid. So 436 00:23:17,680 --> 00:23:20,000 Speaker 4: you want to constantly be looking at that balance between 437 00:23:20,600 --> 00:23:23,280 Speaker 4: how to make sure that the core of the system, 438 00:23:23,680 --> 00:23:25,960 Speaker 4: that is the you know, it's the oxygen, lifeblood of 439 00:23:25,960 --> 00:23:30,119 Speaker 4: any economy, is stable. But that's a necessary but not 440 00:23:30,160 --> 00:23:31,880 Speaker 4: sufficient test. You want to make sure that the rest 441 00:23:31,880 --> 00:23:34,919 Speaker 4: of the system, because of the incentive you creating for 442 00:23:35,040 --> 00:23:37,720 Speaker 4: arbitrage migration, to not leave you with the with the 443 00:23:37,800 --> 00:23:40,040 Speaker 4: overall less stable system. And you should look at the 444 00:23:40,040 --> 00:23:42,520 Speaker 4: fresh at freshened that challenge all the time. 445 00:23:43,480 --> 00:23:46,640 Speaker 3: You talked about this before. When you think about past crises, 446 00:23:46,720 --> 00:23:49,040 Speaker 3: either in the United States or internationally, and there are 447 00:23:49,119 --> 00:23:52,239 Speaker 3: various the book shelf again of the various tools, but 448 00:23:52,280 --> 00:23:55,399 Speaker 3: then there's also the political reality. And even in the US, 449 00:23:55,600 --> 00:23:59,520 Speaker 3: TARP failed the first time, famously, barely passed the second time, 450 00:23:59,560 --> 00:24:02,479 Speaker 3: and of course TARP itself wasn't enough because then of 451 00:24:02,480 --> 00:24:05,159 Speaker 3: course the FED had to engage in a number of 452 00:24:05,280 --> 00:24:09,200 Speaker 3: different programs, and then there was the Obama stimulus on 453 00:24:09,280 --> 00:24:12,080 Speaker 3: top of that afterwards, which was post tarp. You know, 454 00:24:12,160 --> 00:24:16,040 Speaker 3: I'm curiously when you look back through history and the 455 00:24:16,040 --> 00:24:19,119 Speaker 3: New Badget Project and stuff like that, how much is 456 00:24:19,160 --> 00:24:22,000 Speaker 3: it when you think about like system design. This is 457 00:24:22,000 --> 00:24:24,840 Speaker 3: a good way to bail out a whatever it is. 458 00:24:25,119 --> 00:24:27,560 Speaker 3: This is a good way to backstop the deposits, This 459 00:24:27,640 --> 00:24:29,800 Speaker 3: is a good way for the Fed to like find 460 00:24:29,800 --> 00:24:33,000 Speaker 3: a price for buying private bonds, whatever it is, versus 461 00:24:33,880 --> 00:24:37,399 Speaker 3: understanding the political reality of the country that had the 462 00:24:37,400 --> 00:24:41,560 Speaker 3: successful bailout or the successful intervention, I should say at 463 00:24:41,560 --> 00:24:45,480 Speaker 3: the time, because it really does seem to me that 464 00:24:45,480 --> 00:24:49,879 Speaker 3: that's huge. Like in a parliamentary system, there's no division 465 00:24:49,880 --> 00:24:53,080 Speaker 3: of government between the legislator and the head of state, 466 00:24:53,400 --> 00:24:55,200 Speaker 3: and if they have the majority, they could probably pass 467 00:24:55,240 --> 00:24:56,760 Speaker 3: it and you move fast, et cetera. It seems like 468 00:24:56,800 --> 00:24:59,400 Speaker 3: a huge deal in the United States that we don't 469 00:24:59,400 --> 00:25:02,800 Speaker 3: have that sort of same unilateral fiscal capacity often. 470 00:25:02,680 --> 00:25:05,280 Speaker 4: Yeah, exactly. I mean we have a system which where 471 00:25:05,400 --> 00:25:09,439 Speaker 4: the anchor of the global financial system has a central 472 00:25:09,440 --> 00:25:12,560 Speaker 4: bank with much less authority than most major central banks, 473 00:25:12,600 --> 00:25:14,399 Speaker 4: which is what they can do when assets they can 474 00:25:14,440 --> 00:25:16,959 Speaker 4: buy in a crisis, and has a political system, as 475 00:25:16,960 --> 00:25:20,199 Speaker 4: you said, unlike a dominant parliamentary model, where there's a 476 00:25:20,200 --> 00:25:22,480 Speaker 4: set of checks and balances with a lot of rationale 477 00:25:22,680 --> 00:25:25,919 Speaker 4: foundational justice to them, that is designed to make it 478 00:25:26,000 --> 00:25:30,600 Speaker 4: hard for the executive branch to do a bunch of 479 00:25:30,640 --> 00:25:32,600 Speaker 4: things that you have to do quickly in a crisis, 480 00:25:32,720 --> 00:25:36,159 Speaker 4: and that creates a huge vulnerability to the US but 481 00:25:36,280 --> 00:25:39,240 Speaker 4: also to the world. And I think it is something 482 00:25:39,280 --> 00:25:43,920 Speaker 4: where there is a very good case to trying to 483 00:25:43,960 --> 00:25:47,800 Speaker 4: make sure you have some delegated emergency authority at the 484 00:25:47,880 --> 00:25:51,400 Speaker 4: level of the Central Bank and the Treasury, with some constraints, 485 00:25:51,440 --> 00:25:57,240 Speaker 4: some discretion, and good framework for disclosure and protections so 486 00:25:57,280 --> 00:25:59,880 Speaker 4: that you are not putting the country in the pos 487 00:26:00,359 --> 00:26:02,840 Speaker 4: or the global financialism in the position where we are 488 00:26:03,440 --> 00:26:03,880 Speaker 4: too late. 489 00:26:18,960 --> 00:26:22,120 Speaker 2: So Joe mentioned earlier that it's pretty easy to come 490 00:26:22,200 --> 00:26:25,399 Speaker 2: up with potential risks to worry about. Right There's like 491 00:26:25,440 --> 00:26:28,480 Speaker 2: a long list of things at any one time. Right now, 492 00:26:28,520 --> 00:26:31,919 Speaker 2: people talk a lot about the indebtedness of the US 493 00:26:32,280 --> 00:26:36,400 Speaker 2: US treasuries, obviously a bedrock of global finance. People talk 494 00:26:36,440 --> 00:26:40,720 Speaker 2: about things like the basis trade, private credit, all that stuff. 495 00:26:41,320 --> 00:26:42,960 Speaker 2: Where do you see risks right now? 496 00:26:43,280 --> 00:26:45,840 Speaker 4: You know, I think it's good for people to understand 497 00:26:46,080 --> 00:26:51,200 Speaker 4: that these things that are foundational to how well economies 498 00:26:51,240 --> 00:26:56,199 Speaker 4: do cross time, and how fair outcomes are, and the 499 00:26:56,240 --> 00:26:59,080 Speaker 4: incentives for innovation and investment. A lot of these things 500 00:26:59,119 --> 00:27:03,080 Speaker 4: rest on what are intangible some people say sort of 501 00:27:03,119 --> 00:27:07,840 Speaker 4: magical things like the treasury is the risk free asset 502 00:27:08,440 --> 00:27:11,480 Speaker 4: that people feel comfortable they can come take exposure to 503 00:27:11,560 --> 00:27:15,120 Speaker 4: treasuries and to the dollar when they're worried about the world. 504 00:27:15,320 --> 00:27:19,520 Speaker 4: Those things are hugely valuable. People tend to think of 505 00:27:19,560 --> 00:27:22,600 Speaker 4: these things as partly around what's the dollar's roles reserve currency, 506 00:27:23,400 --> 00:27:27,240 Speaker 4: But there's some foundational benefits and they're about a type 507 00:27:27,320 --> 00:27:30,760 Speaker 4: of trust you could say about a confidence and stability 508 00:27:31,040 --> 00:27:36,240 Speaker 4: and rule of law in property rights and predictability. Independence 509 00:27:36,240 --> 00:27:38,840 Speaker 4: of the FED is one piece of that. And I 510 00:27:38,880 --> 00:27:42,600 Speaker 4: think it's important for people to not take for granted 511 00:27:43,320 --> 00:27:46,280 Speaker 4: the durability of those things, because many of them are 512 00:27:46,280 --> 00:27:50,280 Speaker 4: not fully anchored at law. They're part of them, are 513 00:27:50,320 --> 00:27:53,760 Speaker 4: a set of norms and customers, and you know, there's 514 00:27:53,800 --> 00:27:55,879 Speaker 4: the kind of things that you know, you don't know 515 00:27:55,920 --> 00:27:59,080 Speaker 4: you have them until you risk losing them. It's important 516 00:27:59,080 --> 00:28:01,520 Speaker 4: to recognize that to what you've all been talking about, 517 00:28:01,520 --> 00:28:08,200 Speaker 4: these are things that are about trust and credibility, and 518 00:28:08,240 --> 00:28:14,159 Speaker 4: whether the world believes that the US can hold full 519 00:28:14,200 --> 00:28:17,359 Speaker 4: of things together and defend them and protect them is 520 00:28:17,440 --> 00:28:19,720 Speaker 4: you know, Again, it's partly a measure of how fiscally 521 00:28:19,760 --> 00:28:23,720 Speaker 4: responsible we are. It's partly a measure of do people 522 00:28:23,760 --> 00:28:27,720 Speaker 4: trust that FED can operate independent of politics, But it's 523 00:28:27,760 --> 00:28:31,520 Speaker 4: also a function of whether people believe that those foundations 524 00:28:31,560 --> 00:28:36,639 Speaker 4: of relative stability and expectations in rule of law and 525 00:28:36,680 --> 00:28:39,520 Speaker 4: property rights and things like that are still durable protected 526 00:28:40,320 --> 00:28:41,400 Speaker 4: assets of the country. 527 00:28:41,920 --> 00:28:45,400 Speaker 2: So speaking of trust and people believing in the US, 528 00:28:45,680 --> 00:28:49,560 Speaker 2: you were very involved in the FX the currency swap 529 00:28:49,600 --> 00:28:52,880 Speaker 2: lines around the two thousand and eight financial crisis into 530 00:28:52,960 --> 00:28:55,320 Speaker 2: two thousand and nine, and I saw a report over 531 00:28:55,360 --> 00:28:59,200 Speaker 2: the weekend saying that European central banks are, you know, 532 00:28:59,280 --> 00:29:02,760 Speaker 2: policy makers are questioning whether they can still rely on 533 00:29:02,800 --> 00:29:07,480 Speaker 2: the US to actually provide that dollar liquidity in an emergency. Again, 534 00:29:07,920 --> 00:29:11,320 Speaker 2: things are changing when it comes to the US's relationship 535 00:29:11,440 --> 00:29:14,480 Speaker 2: with the rest of the world. So how do you 536 00:29:14,480 --> 00:29:17,040 Speaker 2: think about that and the importance of I guess the 537 00:29:17,160 --> 00:29:20,480 Speaker 2: US's a global role when it comes to financial stability. 538 00:29:20,840 --> 00:29:24,720 Speaker 4: I think Americans and the world understands that the role 539 00:29:24,840 --> 00:29:28,440 Speaker 4: we have, and it's built up over time. You know, 540 00:29:28,440 --> 00:29:33,000 Speaker 4: it existed before World War Two, but its foundations were 541 00:29:33,080 --> 00:29:36,280 Speaker 4: laid in the wake of the Second World War. That 542 00:29:36,280 --> 00:29:40,640 Speaker 4: that system where the US was central and dominant and 543 00:29:40,720 --> 00:29:44,760 Speaker 4: still is dominant today, is a system that's hugely beneficial 544 00:29:44,760 --> 00:29:47,960 Speaker 4: to the United States. It's not designed as an active 545 00:29:48,080 --> 00:29:51,480 Speaker 4: charity to the world. It's something that our presidents believe 546 00:29:51,640 --> 00:29:55,520 Speaker 4: was deeply fundamentally in the US interests. So these things 547 00:29:55,520 --> 00:29:59,520 Speaker 4: you talked about, like the swap lines or the willingness 548 00:29:59,520 --> 00:30:02,400 Speaker 4: to give act to dollar liquidity to foreign central banks 549 00:30:02,400 --> 00:30:05,880 Speaker 4: in a crisis, these things are foundational to the system, 550 00:30:06,080 --> 00:30:08,920 Speaker 4: and they're foundational We made them at foundations is because 551 00:30:08,960 --> 00:30:11,880 Speaker 4: we thought they were fundamental to US interests. 552 00:30:11,960 --> 00:30:14,200 Speaker 3: Can you explain that for how? Because I do think 553 00:30:14,240 --> 00:30:16,320 Speaker 3: some of the big questions are people look at the 554 00:30:16,400 --> 00:30:19,560 Speaker 3: United States's relationship with the world and they sort of ask, like, oh, 555 00:30:19,560 --> 00:30:20,960 Speaker 3: what are we getting out of this? So how would 556 00:30:21,000 --> 00:30:23,800 Speaker 3: you articulate the US's role and what we get out 557 00:30:23,800 --> 00:30:24,000 Speaker 3: of it? 558 00:30:24,320 --> 00:30:26,800 Speaker 4: You know, it's a hard thing to explain and defend. 559 00:30:26,840 --> 00:30:28,760 Speaker 4: It's one of those things that until you lose it, 560 00:30:28,760 --> 00:30:31,400 Speaker 4: it's hard for people to appreciate it. One way to 561 00:30:31,440 --> 00:30:32,760 Speaker 4: think about it is, you know, we're I don't know, 562 00:30:32,800 --> 00:30:36,200 Speaker 4: we're single digit percent of the world's population. We're twenty 563 00:30:36,200 --> 00:30:39,200 Speaker 4: five percent of the world's GDP. That would make you 564 00:30:39,320 --> 00:30:43,760 Speaker 4: think that we have a big stake in the basic 565 00:30:43,880 --> 00:30:46,760 Speaker 4: quality of economic outcomes outside of the United States just 566 00:30:46,840 --> 00:30:49,160 Speaker 4: by that basic ratio, But we're seventy five percent of 567 00:30:49,200 --> 00:30:53,280 Speaker 4: the market cap of equity markets globally, So we have 568 00:30:53,360 --> 00:30:59,160 Speaker 4: a huge fundamental economic interest that comes from what happens 569 00:30:59,240 --> 00:31:05,000 Speaker 4: outside are the frontiers of our borders and a lot 570 00:31:05,040 --> 00:31:06,800 Speaker 4: of benefits to us and trying to make sure we 571 00:31:06,840 --> 00:31:10,280 Speaker 4: protect and sustain that can't be indifferent to the fates 572 00:31:10,280 --> 00:31:11,200 Speaker 4: of otter nations. 573 00:31:12,040 --> 00:31:16,320 Speaker 2: So you're a former civil servant, even before you were 574 00:31:16,440 --> 00:31:20,240 Speaker 2: US Treasury secretary. You were a civil servant way back 575 00:31:20,320 --> 00:31:24,520 Speaker 2: in the day. And obviously government bureaucracy is a big 576 00:31:24,560 --> 00:31:27,960 Speaker 2: story right now, and we've done a couple episodes on 577 00:31:28,520 --> 00:31:32,680 Speaker 2: DOGE and what they're doing specifically at US Treasury in 578 00:31:32,760 --> 00:31:35,200 Speaker 2: the payment system. There's a lot of back and forth 579 00:31:35,320 --> 00:31:38,400 Speaker 2: about exactly what the goal is, how much coding power 580 00:31:38,480 --> 00:31:42,080 Speaker 2: the team actually has. But what's your impression of what's 581 00:31:42,120 --> 00:31:45,440 Speaker 2: going on here and how much modernization I guess based 582 00:31:45,480 --> 00:31:49,520 Speaker 2: on your experience at Treasury is actually needed in that system. 583 00:31:50,160 --> 00:31:51,680 Speaker 4: I you know, as you said, I grew up in 584 00:31:51,720 --> 00:31:54,240 Speaker 4: the Treasury in some sense, you know, I got to 585 00:31:54,240 --> 00:31:57,880 Speaker 4: work with a hugely talented group of people, ethical people, 586 00:31:58,000 --> 00:32:01,800 Speaker 4: very smart people. Wonderful, amazing experience for me. And of 587 00:32:01,880 --> 00:32:06,240 Speaker 4: course anybody who's been in government has lived with a 588 00:32:06,320 --> 00:32:11,680 Speaker 4: whole bunch of things, obviously technology, but not just technology, 589 00:32:11,720 --> 00:32:13,960 Speaker 4: a bunch of things where of course if you took 590 00:32:13,960 --> 00:32:16,640 Speaker 4: a fresh look at you'd say, gee, we could make 591 00:32:16,680 --> 00:32:20,560 Speaker 4: that better. And I think a huge amount of credibility 592 00:32:20,600 --> 00:32:26,640 Speaker 4: and trust in government requires people in those roles trying 593 00:32:26,640 --> 00:32:33,920 Speaker 4: to continually bring a objective reform and improvement acknowledge. I mean. 594 00:32:33,920 --> 00:32:36,400 Speaker 4: One of the things that I first met Larry Summers 595 00:32:36,720 --> 00:32:38,640 Speaker 4: when he first came to run the international part of 596 00:32:38,680 --> 00:32:42,440 Speaker 4: the Treasury when I was a civil servant, and one 597 00:32:42,480 --> 00:32:44,400 Speaker 4: of the things that I admired about him most I 598 00:32:44,440 --> 00:32:46,960 Speaker 4: still admired on the most is that he came in 599 00:32:47,040 --> 00:32:50,640 Speaker 4: and he had this deep conviction that anything we were doing, 600 00:32:51,680 --> 00:32:55,480 Speaker 4: any type of policy, any type of practice was short 601 00:32:55,520 --> 00:32:58,160 Speaker 4: of the frontier of knowledge, and that our basic idea 602 00:32:58,520 --> 00:33:00,400 Speaker 4: job was to get it closer to the front here. 603 00:33:00,680 --> 00:33:02,520 Speaker 4: And I think it's very important for people to come 604 00:33:02,520 --> 00:33:05,280 Speaker 4: into these jobs, whether you're a civil servant, where you're 605 00:33:05,280 --> 00:33:08,479 Speaker 4: coming in fresh political thing, to bring that basic have 606 00:33:08,520 --> 00:33:12,240 Speaker 4: that sense of obligation and a possibility. So of course 607 00:33:12,240 --> 00:33:15,560 Speaker 4: there's you know, huge frontiers where you can if you 608 00:33:15,680 --> 00:33:19,640 Speaker 4: bring an effort to improve and reform. And it's not 609 00:33:19,720 --> 00:33:23,640 Speaker 4: just the not just the tech stack of the IRS 610 00:33:23,760 --> 00:33:26,920 Speaker 4: or the Treasury or the FED fast opportunities there. 611 00:33:27,880 --> 00:33:32,320 Speaker 2: So Joe and I we love historical anecdotes, We love stories. 612 00:33:32,400 --> 00:33:35,960 Speaker 2: Our listeners do too. What was the most creative thing 613 00:33:36,200 --> 00:33:39,360 Speaker 2: that you did as a policy maker back in two 614 00:33:39,440 --> 00:33:42,040 Speaker 2: thousand and eight in the financial crisis? The thing that 615 00:33:42,600 --> 00:33:44,800 Speaker 2: you know, you don't have to necessarily be the most 616 00:33:44,840 --> 00:33:47,000 Speaker 2: proud of it, but the thing that was like the 617 00:33:47,040 --> 00:33:50,000 Speaker 2: most I guess out there creative solution. 618 00:33:50,520 --> 00:33:52,600 Speaker 4: This is not going to be as interesting to ask 619 00:33:52,600 --> 00:33:55,560 Speaker 4: your question. When I left my old job and I 620 00:33:55,640 --> 00:33:58,800 Speaker 4: was writing about the financial crisis, and I was starting 621 00:33:58,800 --> 00:34:01,200 Speaker 4: to teach with Andrew metri ga Yale the financial crisis, 622 00:34:01,320 --> 00:34:03,320 Speaker 4: I spent a lot of time looking back over a 623 00:34:03,360 --> 00:34:06,120 Speaker 4: bunch of those choices we made or went into them, 624 00:34:06,280 --> 00:34:08,200 Speaker 4: and I remember having the experience over and over again, 625 00:34:08,239 --> 00:34:11,920 Speaker 4: which I love, which is I'd convene this team of 626 00:34:11,920 --> 00:34:13,960 Speaker 4: people that are working on some aspect of the crisis, 627 00:34:14,000 --> 00:34:16,640 Speaker 4: and I'd ask them and who where did that idea 628 00:34:16,680 --> 00:34:19,360 Speaker 4: come from? Whose idea was that? And I love the 629 00:34:19,440 --> 00:34:22,840 Speaker 4: fact that people would say over and over again, you know, 630 00:34:22,920 --> 00:34:25,240 Speaker 4: I can't really remember I remember this for the meeting 631 00:34:25,320 --> 00:34:27,759 Speaker 4: Maature ideas it was. Anyways, it was a great group 632 00:34:27,760 --> 00:34:31,520 Speaker 4: of people. I think that the most valuable, in some ways, 633 00:34:31,520 --> 00:34:35,600 Speaker 4: the most innovative thing we did was how we decided 634 00:34:35,600 --> 00:34:39,279 Speaker 4: to recapitalize the banking system and what became known as 635 00:34:39,320 --> 00:34:41,359 Speaker 4: the stress test as a way to you know, what 636 00:34:41,360 --> 00:34:43,040 Speaker 4: we basically said is, we want to make sure the 637 00:34:43,040 --> 00:34:45,680 Speaker 4: banking system has enough capital to survive a great depression 638 00:34:45,719 --> 00:34:47,919 Speaker 4: like outcome, and we're going to get people a chance 639 00:34:47,960 --> 00:34:49,640 Speaker 4: to go raise that capital, and if they can't raise it, 640 00:34:49,640 --> 00:34:53,440 Speaker 4: we're going to give them the capital. And that alongside 641 00:34:53,520 --> 00:34:54,799 Speaker 4: all the things that had been done in the fall 642 00:34:54,800 --> 00:35:00,640 Speaker 4: of a weight, alongside the Kynesian stimulus, the first initial simulus, 643 00:35:01,000 --> 00:35:03,399 Speaker 4: and what the FED was doing that was very, very 644 00:35:03,480 --> 00:35:07,200 Speaker 4: very helpful in trying to take out the remaining risk 645 00:35:07,360 --> 00:35:09,400 Speaker 4: that we'd fall off the abyss, and that that was 646 00:35:09,440 --> 00:35:11,640 Speaker 4: something that countries hadn't done quite that way before. 647 00:35:12,280 --> 00:35:14,480 Speaker 2: Do you remember how you came up with that idea? 648 00:35:14,840 --> 00:35:17,080 Speaker 4: A lot of awesome people sitting at a table together. 649 00:35:18,600 --> 00:35:21,120 Speaker 3: Tim Guidner, thank you so much for coming on odd Losa. 650 00:35:21,239 --> 00:35:22,839 Speaker 3: Nice to see you guys really appreciate it. 651 00:35:22,960 --> 00:35:24,239 Speaker 4: I'm a big fan of what you guys do. I 652 00:35:24,280 --> 00:35:27,000 Speaker 4: love the you know, the long, deep exploration. 653 00:35:27,400 --> 00:35:28,399 Speaker 3: I love to hear it. 654 00:35:28,360 --> 00:35:32,720 Speaker 4: Of the highly technical but consequential chapters of financial history. 655 00:35:33,000 --> 00:35:33,560 Speaker 2: Producers. 656 00:35:33,640 --> 00:35:35,439 Speaker 5: Keep that in, Yeah, keep that in, all right, they'll 657 00:35:35,480 --> 00:35:45,080 Speaker 5: take care of him. 658 00:35:48,640 --> 00:35:48,920 Speaker 1: Joe. 659 00:35:48,960 --> 00:35:52,759 Speaker 2: Obviously, that was a fascinating conversation. Again, we have a 660 00:35:52,800 --> 00:35:56,200 Speaker 2: bias towards talking about this stuff because we lived through it. 661 00:35:56,520 --> 00:36:00,400 Speaker 2: But I did think that Tim's point about institution tutional 662 00:36:00,960 --> 00:36:04,360 Speaker 2: memory is really important, and it is true. You know, 663 00:36:04,440 --> 00:36:07,320 Speaker 2: two thousand and eight is fading into the background capital 664 00:36:07,480 --> 00:36:11,279 Speaker 2: h history, as you mentioned, which means if something happens, 665 00:36:11,400 --> 00:36:14,360 Speaker 2: then potentially people aren't going to have that sort of 666 00:36:14,800 --> 00:36:18,919 Speaker 2: instinctual knee jerk knowledge of what they need to do. 667 00:36:19,120 --> 00:36:21,840 Speaker 2: And so from that perspective, I find this new Badget 668 00:36:21,880 --> 00:36:23,360 Speaker 2: program very interesting. 669 00:36:23,840 --> 00:36:24,600 Speaker 3: Yeah, I did too. 670 00:36:24,760 --> 00:36:24,920 Speaker 1: You know. 671 00:36:25,000 --> 00:36:28,400 Speaker 3: The other thing that I think is interesting is like, Okay, 672 00:36:28,440 --> 00:36:31,280 Speaker 3: so you have to go a certain amount of time 673 00:36:32,040 --> 00:36:34,560 Speaker 3: for people to forget and for people to just sort 674 00:36:34,560 --> 00:36:37,800 Speaker 3: of not remember what the playbook looks like, et cetera. 675 00:36:38,200 --> 00:36:41,000 Speaker 3: But also he said, and I thought it was really interesting, 676 00:36:41,280 --> 00:36:44,640 Speaker 3: is you also need time for some sort of balance 677 00:36:44,680 --> 00:36:50,080 Speaker 3: sheet dislocation or lopsidedness to emerge, or the dry tinder 678 00:36:50,120 --> 00:36:53,279 Speaker 3: that can explode. And so why, you know, why didn't 679 00:36:53,320 --> 00:36:56,520 Speaker 3: we have a crisis in nineteen eighty four with Continental Illinois. 680 00:36:56,520 --> 00:37:00,360 Speaker 3: Well maybe at that time there just wasn't some derange 681 00:37:00,400 --> 00:37:03,000 Speaker 3: of the financial system that that had the ability to 682 00:37:03,000 --> 00:37:05,719 Speaker 3: set off. And so I don't know, you know, obviously, 683 00:37:05,800 --> 00:37:10,440 Speaker 3: like COVID was this very bizarre shock where the economy 684 00:37:10,520 --> 00:37:13,440 Speaker 3: was sort of shut down and then there was a 685 00:37:13,480 --> 00:37:16,680 Speaker 3: financial crisis for about five minutes. But you do wonder 686 00:37:16,760 --> 00:37:19,920 Speaker 3: whether these sort of like imbalances have built up in 687 00:37:20,000 --> 00:37:22,600 Speaker 3: some extreme way that we haven't seen is like a really. 688 00:37:22,520 --> 00:37:25,759 Speaker 2: Interesting question, right, And just since you brought up the pandemic, 689 00:37:25,840 --> 00:37:28,239 Speaker 2: this was the other thing that struck me so there 690 00:37:28,280 --> 00:37:30,640 Speaker 2: is that argument that in two thousand and eight the 691 00:37:30,760 --> 00:37:33,360 Speaker 2: US should have done more on the fiscal side, so 692 00:37:33,560 --> 00:37:37,960 Speaker 2: you know, help people pay their mortgages, mortgages, write some checks, 693 00:37:38,040 --> 00:37:41,239 Speaker 2: helicopter money and all of that. And then in the 694 00:37:41,280 --> 00:37:45,240 Speaker 2: pandemic we actually did that, We handed out some money 695 00:37:45,280 --> 00:37:48,759 Speaker 2: for both people and businesses, and then we had inflation. 696 00:37:49,560 --> 00:37:52,400 Speaker 2: And so I guess, like the needle kind it feels 697 00:37:52,440 --> 00:37:55,160 Speaker 2: like we're swinging from like on a pendulum, right, like 698 00:37:55,239 --> 00:37:59,200 Speaker 2: it's either too little fiscal or too much, and we've 699 00:37:59,239 --> 00:38:00,920 Speaker 2: never gotten it exactly. 700 00:38:00,600 --> 00:38:03,560 Speaker 3: Right, and we'll never get it exactly right. But two things, 701 00:38:03,760 --> 00:38:06,520 Speaker 3: like in April twenty twenty, I still think a lot 702 00:38:06,600 --> 00:38:09,160 Speaker 3: of people would be pretty happy with the economic outcome 703 00:38:09,239 --> 00:38:11,920 Speaker 3: that we had, you know, two or three years later. 704 00:38:12,600 --> 00:38:16,000 Speaker 3: But also more deeply, we did a bunch of stuff 705 00:38:16,040 --> 00:38:18,279 Speaker 3: in the twenty twenties that I've said many times on 706 00:38:18,320 --> 00:38:21,200 Speaker 3: the podcast we probably should have done in the twenty tens, 707 00:38:21,640 --> 00:38:24,759 Speaker 3: not just on the pure helicopter money fiscal stimulus, but 708 00:38:24,800 --> 00:38:28,080 Speaker 3: a lot of the things on like you know, industrial policy, energy, 709 00:38:28,239 --> 00:38:33,080 Speaker 3: et cetera. When there was widely available labor, when there 710 00:38:33,160 --> 00:38:36,279 Speaker 3: was widely available raw materials, because so much of the economy, 711 00:38:36,600 --> 00:38:39,160 Speaker 3: global economy was slack or in a state of slack, 712 00:38:39,640 --> 00:38:41,600 Speaker 3: A little bit of a missed opportunity. 713 00:38:41,040 --> 00:38:43,600 Speaker 2: There, Yeah, like you know, build Jim Conways. 714 00:38:43,600 --> 00:38:45,120 Speaker 3: Do we need to bring Tim back in here? I 715 00:38:45,160 --> 00:38:47,480 Speaker 3: need to make this one last point to him. Yeah, 716 00:38:48,280 --> 00:38:50,040 Speaker 3: I just need to tell you I think you miss it. No, 717 00:38:50,160 --> 00:38:50,800 Speaker 3: I'm just kidding. 718 00:38:50,880 --> 00:38:53,480 Speaker 2: But on that note, I mean Tim was bringing up 719 00:38:53,520 --> 00:38:56,760 Speaker 2: the Great Depression as the sort of baseline for judging 720 00:38:56,800 --> 00:39:00,680 Speaker 2: the success of interventions, which again probably a low bar. 721 00:39:00,960 --> 00:39:04,080 Speaker 2: But we did some stuff during the Great Depression, like 722 00:39:04,160 --> 00:39:07,440 Speaker 2: we built things and that provided jobs to a lot 723 00:39:07,440 --> 00:39:11,000 Speaker 2: of people during a very bad time. So shall we 724 00:39:11,040 --> 00:39:11,440 Speaker 2: leave it there. 725 00:39:11,400 --> 00:39:13,480 Speaker 3: One day we'll get one, right, that's right. 726 00:39:13,880 --> 00:39:16,880 Speaker 2: Okay. This has been another episode of the Audlots podcast. 727 00:39:16,960 --> 00:39:20,400 Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway. 728 00:39:20,160 --> 00:39:22,800 Speaker 3: And I'm Jill Wisenthal. You can follow me at the Stalwart. 729 00:39:23,120 --> 00:39:26,360 Speaker 3: Follow our producers Carmen Rodriguez at Carmen Armann, dash Ol 730 00:39:26,360 --> 00:39:29,600 Speaker 3: Bennett at Dashbot and Keil Brooks at Kale Brooks. And 731 00:39:29,719 --> 00:39:32,360 Speaker 3: check out the new Badget project at the Yale Program 732 00:39:32,400 --> 00:39:36,839 Speaker 3: on Financial Stability. Really fascinating stuff, really interesting research. I'm 733 00:39:36,880 --> 00:39:39,840 Speaker 3: sure even if you're not a central banker in a crisis, 734 00:39:40,040 --> 00:39:43,400 Speaker 3: you'll learn something from reading through it. From our Oddlass content, 735 00:39:43,400 --> 00:39:45,880 Speaker 3: go to Bloomberg dot com slash odd Lots. We have 736 00:39:45,960 --> 00:39:48,719 Speaker 3: all of our episodes in a daily newsletter, and you 737 00:39:48,719 --> 00:39:50,800 Speaker 3: could chat about all of these topics twenty four to 738 00:39:50,800 --> 00:39:54,600 Speaker 3: seven in our discord Discord dot gg slash odline. 739 00:39:54,640 --> 00:39:57,200 Speaker 2: And if you enjoy odd Lots, if you like it 740 00:39:57,280 --> 00:40:00,640 Speaker 2: when we look back on financial crisis history, then please 741 00:40:00,680 --> 00:40:03,800 Speaker 2: leave us a positive review on your favorite podcast platform. 742 00:40:04,080 --> 00:40:07,080 Speaker 2: And remember, if you are a Bloomberg subscriber, you can 743 00:40:07,120 --> 00:40:10,680 Speaker 2: listen to all of our episodes absolutely ad free. All 744 00:40:10,719 --> 00:40:12,640 Speaker 2: you need to do is find the Bloomberg channel on 745 00:40:12,760 --> 00:40:22,200 Speaker 2: Apple Podcasts and follow the instructions there. Thanks for listening.