Robert Pozen looks at the causes of the 2008 financial collapse and says that the financial system needs to be reformed so that we don’t see a repeat down the road. He argues for changing the incentive system on Wall Street and calls for strengthening the government regulation of financial markets. (1 hours, 9 minutes)
Read the full story »By John Plender. After two and a half years of relentless financial pounding, the crisis literature is becoming mountainous. To command the weary reviewer’s attention, any new book on the aberrations of the financial community has to have a clear focus and make a compelling case. In Too Big To Save? Robert Pozen, chairman of mutual fund group MFS Investment Management and a former vice-chairman of Fidelity Investments, pulls off the trick.
American subsidies are justified as necessary to promote home ownership in the US. Indeed, the rate of home ownership in the US rose to 68 per cent by 2006. Yet, without these governmental subsidies, the rate of home ownership in Canada also rose to 68 per cent in 2006. This comparison suggests that the large American subsidies for home purchases have led to higher home prices in the US rather than significant increases in the rate of US home ownership.
The administration could give the big banks a choice — replace your guaranteed debt with newly issued non-guaranteed bonds, or pay the US Treasury $6 billion representing the remaining value of this federal guarantee over the next two years. This would not be a punishment; it would be the fair thing to do for US taxpayers.
If Glass-Steagall were reinstated, we would be recreating the short-term funding weakness that forced Bear Stearns and Lehman Brothers into insolvency.
If the Treasury bails out large banks in the future, it should demand the same terms as those received by sophisticated institutional investors. Some of the rescued banks will become profitable, while others will become insolvent. Taxpayers need to maximize their gains on the successful turnarounds to compensate for their losses on the bailouts that inevitably fail.
By Ross Kerber. University economists are already teaching courses on the history of the financial crisis of 2008 and the policy responses that followed. Robert Pozen’s new book could become required reading.
“Too Big to Save? How to Fix the U.S. Financial System” (Wiley, $29.95), provides both a detailed look at the run-up to the financial system’s brush with disaster and many prescriptions in response.
Government action to stem collapse of the U.S. financial system was certainly warranted, agrees professor Robert Pozen. But results include less competition and increased risk to taxpayers. A Q&A from the HBS Alumni Bulletin and book excerpt from Too Big to Save?
By Robert Pozen. On Monday, President Barack Obama pressed 12 large US banks – all recipients of federal assistance – to increase their lending to businesses and consumers. In fact, during the third quarter of 2009, total loans at US banks fell by $210bn (€144bn, £129bn), or 3 per cent, the biggest quarterly decline since 1984.
In the latest crackdown, Kenneth Feinberg announced a $500K salary cap on executives at bailed-out firms. Robert Pozen on how the banks can clean house—and get the feds off their backs.
By Robert Gavin. Robert Pozen, chairman of Boston mutual fund firm MFS Investment Management, recently published a new book, “Too Big to Save?,’’ which explores the global financial crisis and the steps needed to reform the US financial system.