Stiglitz: Banking Problems Are Now Bigger Than Pre-Lehman

By Mark Deen and David Tweed

Sept. 13 (Bloomberg) -- Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.


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“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”

Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”

A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.’s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.

While Obama wants to name some banks as “systemically important” and subject them to stricter oversight, his plan wouldn’t force them to shrink or simplify their structure.

Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.

G-20 Steps

“We aren’t doing anything significant so far, and the banks are pushing back,” he said. “The leaders of the G-20 will make some small steps forward, given the power of the banks” and “any step forward is a move in the right direction.”

G-20 leaders gather next week in Pittsburgh and will consider ways of improving regulation of financial markets and in particular how to set tighter limits on remuneration for market operators. Under pressure from France and Germany, G-20 finance ministers last week reached a preliminary accord that included proposals to claw-back cash awards and linking compensation more closely to long-term performance.

“It’s an outrage,” especially “in the U.S. where we poured so much money into the banks,” Stiglitz said. “The administration seems very reluctant to do what is necessary. Yes they’ll do something, the question is: Will they do as much as required?”

Global Economy

Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is “far from being out of the woods” even if it has pulled back from the precipice it teetered on after the collapse of Lehman.

“We’re going into an extended period of weak economy, of economic malaise,” Stiglitz said. The U.S. will “grow but not enough to offset the increase in the population,” he said, adding that “if workers do not have income, it’s very hard to see how the U.S. will generate the demand that the world economy needs.”

The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.

“The question then is who is going to finance the U.S. government,” Stiglitz said.

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.netDavid Tweed in Paris at
Last Updated: September 13, 2009 14:38 EDT

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Comment by Tom Dennen on September 14, 2009 at 8:54am

By Tom Dennen

This Constantly-Under-Revision-And-Almost-Unified Economic Field Theory of money will hopefully clarify some things for the life-long-mortgaged man-in-the-street:

(Revision is the daily polish I put on the economic apple that just recently fell on my head – We’ll have some apple pie and ice cream with lunch during the seminars, served up after the barbecued banksters).

There are two basic kinds of money – one is based on debt, the other is based on work.

The money based on debt is money essentially stolen by using the lending-with-interest debt-based banking system we all know so well, which takes money from the wealth created by work done by ordinary people.

The wealth created by your work (from which a portion is taken away from you by non-existing tax 'laws'.). The money you put into the bank is then lent back to you through the mortgage debt bondage based monetary illusion that the land you buy is 'owned' by something other than the collective sovereign ownership of you, the people.

“Our money is an illusion. Except for coins, which compose only one ten-thousandth of the money supply, all of our money today consists of debt to private banks. Banks always take back more money in principal and interest than they put into the money supply as principal, making the system basically a pyramid scheme. After 300 years, this scheme has spread around the world and has now reached its mathematical limits. The whole world has been captured in the debt trap of a private international banking monopoly.” - Ellen Brown, California attorney and economist, also one of the leaders of the Global Monetary Reform movement and author of “The Web of Debt” – (Google An Open Letter to the American Monetary Institute.)


The first lie we buy is the link in the chain of debt-based money around your neck that puts you into what is called a mortgage (mort=death; gage = cage or bond), a twenty-year debt on pretty much freely-available commodities like bricks, wood and mortar that you could put together yourself. But rather a large debt is used to build a house that keeps you in an indentured servitude for about twenty of the most productive years of your life: From about twenty-five years of age to forty-five years old, ripped out of your living soul with – maybe – a small pension at the end of it that is further stolen by ‘health-care’ scams.
This whole Swine Flu scam is about debt-based money: the Profit-before-People money, the pursuit (and love, or worship) of money over any other human concern.
The other kind of money, based on your work (all wealth is created by work said economic guru Adam Smith) is sovereign money, money that lets you keep the value of your work: Pieces of paper used to represent work rather than debt are called Sovereign currency, which is basically a trade between your goods, services or ideas against services, food and shelter from your community, really a credit-note-backed barter system that no outsiders can interfere with, only add to, provided that certain protective ‘firewalls’ are set up.
If the love of money is the root of all evil, what is the formalized worship of money? Capitalism, which has brought us, once again, to another ‘global meltdown’.
This ‘meltdown’ is very much part of today’s history, but is also a pattern of organized theft over the last three hundred years of Capitalism, and all of that which I mention here leads up to your historic now and can be checked, challenged, researched and then wept over because here is proof that yet another generation of western citizens has simply been parted from its wealth once again - note that no Sharia Muslim banks have experienced ‘distress’ in the last ten years; they don't allow usury (interest) into the mix and didn’t buy any western-based ‘toxic’ derivatives.
I’ve condensed western financial history through the last three centuries of middle-class wealth being transferred to the already wealthy, the main function of the Debt-is-Money system called Capitalism thusly:
On average, every forty-six years, (plus the 9-year gap between market peak and market crash = fifty-five years) for the last three hundred years since the collapse of the South Sea Bubble in the second decade of the1700s, there have been five more commodity peaks in the world's stock markets, followed by a crash, followed by a depression (and the theft of another generation's wealth.)
Read from page 146 of "The Great Reckoning" by James Dale Davidson and William Rees-Mogg, Sidgwick & Jackson, published in 1993, when by then we should have known. (Actually, read the whole book)
There has been a clockwork nine-year gap between commodity peaks and market crashes over the last five generations.
Add forty-six years to that (the average number of years between peak and crash) and you have a boom-bust cycle twice every hundred years or once a generation, meaning every generation of working and middle-class citizens, for the last three hundred years has been good and truly and thoroughly plucked:
· First Time: Commodity prices peaked in London in 1711 The South Sea Bubble burst exactly nine years later in 1720.
Depression followed.
· Second time: Producer prices peaked in London in 1763. The London stock market crashed again in 1772 (nine years later).
Depression followed.
· Third time: Commodity prices peaked in London in 1816.The London stock market crashed in 1825 (nine years later).
depression followed.
· Fourth time: Wholesale prices peaked in New York in 1864. A worldwide assets crash began in May 1873 (nine years later).
Depression followed.
* Fifth time: Then followed our beloved Great Depression in the 30s, about which much has been said, from which, little learned.
Sixth time: Commodity prices peaked some fifty years later in Tokyo, in 1980. The Tokyo stock market crashed in 1989 (again, nine years later). The depression following that crash is now upon us:
My interpretation of the Davidson, Reese-Mogg observation of these last six economic Tsunamis is that they were deliberate, organized, planned serial orchestrations of theft by the banking cartels:
Once is an accident, twice is a coincidence, and three times is a Declaration of War.
Four times is the realization that the Declaration of War fell on the deaf ears of sleeping fools, five times is simple daylight rape and plunder of the same fools' children – the sixth time, this time, Grand Theft, Planet©, is perhaps, hopefully, a lesson finally learned, and do we wake up?
Yes, we do.
Add this up: In the context of what I’ve just researched and identified, 1980 plus 46 years means the next commodity peak should be around 2026 and the next crash exactly nine years later, in 2035.
If you’ve followed my reasoning, you can start planning for your children’s extremely wealthy retirement, because if the goldsmith banking system is not dismantled in favor of local (or nation-wide) Sovereign currencies, the boom-bust business will continue as usual, but at least your kids won’t get ripped off.
Of course, making money on this information carries a moral baggage that, as far as I am concerned would be too heavy to carry.
Which brings us to ‘Sovereign money’: I will run seminars on sovereign money anytime at all, anywhere – pay my way there and back to my home, put me up and feed me while I’m there and after the seminar, work out a fee, if any.
Contact Tom Dennen’s seminar on why Sovereign currency works better than the maxed-out credit card debt-based system you are locked into, mail me here:
You have a way to get out of the Debt Trap!

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