On
http://www.newyorker.com/reporting/2010/03/01/100301fa_fact_macfarquhar?currentPage=11">page 11 of this week's New Yorker profile on Krugman,
Krugman expresses his opinion of Wall Street and its benefits to the world:
Why was it so politically difficult to reregulate the banks? he wondered. Why couldn’t the Administration harness the populist outrage? What good had Wall Street ever done for America? “There must be something useful in there, but it is really hard to see what,” he says. “That’s everybody’s challenge: come up with a clearly beneficial example of financial innovation without mentioning A.T.M.s, and no one can do it. If there are arbitrage opportunities and you’re able to spot them a few seconds before anybody else, you can make a lot of money, but there’s no actual social gain from doing that. We’ve tried talking to our friends in finance, and they say, ‘Liquidity, liquidity, liquidity.’ Well, there is some social loss if people are hanging on to a lot of idle cash, so the financial system, by providing liquid assets that provide a pretty good yield, is supposed to deal with that. But it turns out that, just when you need it most, that liquidity froze.”
This sentiment had clearly been building awhile. Earlier, on
http://www.newyorker.com/reporting/2010/03/01/100301fa_fact_macfarquhar?currentPage=10">page 10, he expessed his reaction to the utterances of the finance industry spokespukes we've been seeing on the teebee:
“Dimon was really stupid this morning,” Krugman said. He was thinking about writing his column the next day about the Financial Crisis Inquiry Commission. He had read an account of the congressional hearings in the newspaper which quoted Jamie Dimon, the C.E.O. of JPMorgan Chase, and Lloyd Blankfein, the C.E.O. of Goldman Sachs, saying things so clueless, so insensitive, and so comprehensively boneheaded that even he, not inclined to think well of them, could hardly believe it, and so he had spent that morning vainly hunting for the transcript to see if there was something mitigating about the context that the article had missed. Dimon had commented that financial crises were just things that happened every few years; Blankfein had compared the crisis to an act of God, like a hurricane. Krugman was curious to know whether these giants of Wall Street understood what they’d done wrong. There was a callousness coming through, he felt. Still, in the end, the spectacle wasn’t that satisfying, because this wasn’t the Pecora Commission, of the thirties, which led to the passing of the Glass-Steagall Act. It was probably just a bit of Kabuki that would end in not much.
The article is well worth reading in its entirety. It mentions his work routine, his wife, and their two cats, Albert Einstein and Doris Lessing. But again, the killer quote is this one:
We’ve tried talking to our friends in finance, and they say, ‘Liquidity, liquidity, liquidity.’ Well, there is some social loss if people are hanging on to a lot of idle cash, so the financial system, by providing liquid assets that provide a pretty good yield, is supposed to deal with that. But it turns out that, just when you need it most, that liquidity froze.
Trillions for nothing, and their kicks for free.
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