Financial Crisis and Policy Responses

Simon Johnson, a professor at MIT, discusses the financial crisis of 2008, highlighting the lack of accountability for banks and the need for policy reform. He critiques the deregulation trends since the 1970s and emphasizes the importance of addressing structural issues in the financial system. Johnson calls for a return to stricter regulations akin to those post-World War II and draws on historical examples of effective financial reform. He warns of future risks, particularly in emerging markets, and urges for decisive action to prevent recurring crises.

What was the primary purpose of the Baseline Scenario blog created by Simon Johnson and James Kwak?

• To criticize the Obama administration

• To analyze and propose solutions for the financial crisis

• To promote financial products

• To support deregulation of banks

How did the government respond to the financial crisis according to Simon Johnson?

• By imposing strict regulations on banks

• By allowing banks to operate without significant changes

• By reducing taxes for financial institutions

• By nationalizing all major banks

What significant legislative change in the 1990s contributed to the financial crisis?

• The introduction of the Glass-Steagall Act

• The nationalization of banks

• The increase in corporate taxes

• The deregulation of over-the-counter derivatives

What is the 'too big to fail' problem mentioned in the transcript?

• Banks being too small to influence the economy

• Banks being unable to compete internationally

• Banks being so large that their failure would harm the economy

• Banks refusing to lend money to small businesses

According to Simon Johnson, what is the main issue with the current financial system?

• It is too heavily regulated

• It is dominated by a small group of powerful individuals

• It lacks innovation

• It is too focused on small businesses

What does Simon Johnson believe about the size of banks and their benefits to society?

• The size of banks is irrelevant to their impact

• Smaller banks are less efficient

• Banks over a certain size do not confer additional benefits

• Larger banks provide more benefits to society

What is the perceived advantage that large banks have over smaller ones?

• Higher interest rates on loans

• Lower borrowing costs due to implicit government guarantees

• More customer trust

• Better technology

What does Simon Johnson identify as a potential future risk in the financial system?

• A decrease in global trade

• A rise in interest rates

• An unsustainable buildup of debt in emerging markets

• A decline in technological innovation

Which historical figure is mentioned as having successfully challenged financial power?

• George Washington

• Abraham Lincoln

• Teddy Roosevelt

• John F. Kennedy

What does Simon Johnson suggest is necessary to address the current financial system's issues?

• Increased deregulation

• A new political leadership similar to Teddy Roosevelt

• Complete nationalization of banks

• Reducing taxes for financial institutions