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EconTalk

Charles Calomiris on the Financial Crisis

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4.74.3K Ratings

🗓️ 26 October 2009

⏱️ 88 minutes

🧾️ Download transcript

Summary

Charles Calomiris of Columbia Business School talks with EconTalk host Russ Roberts about the financial crisis. Calomiris argues that it is important to put the crisis in historical perspective in the context of other bank crises. He argues that bank crises differ widely across time and place--some times and some places are placid, others are prone to regular crises. Calomiris argues that frequent episodes of failure are tied to government guarantees such as various forms of deposit insurance or similar incentives for risk-taking. Looking at the current crisis, Calomiris indicts "too big to fail," the government's reliance on ratings agencies as a measure of risk, and poor corporate governance as the key causes.

Transcript

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0:00.0

Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts

0:13.9

of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org

0:21.2

where you can subscribe, find other episodes, comment on this podcast, and find links to

0:26.5

another information related to today's conversation. Our email address is mailadicontalk.org. We'd

0:33.6

love to hear from you.

0:36.7

Today is October 21st, 2009. My guest is Charles Calamaris Henry Kaufman, Professor of

0:44.2

Financial Institutions at the Columbia Business School and Research Associate at the National

0:49.2

Bureau of Economic Research. Charles, welcome to Econ Talk.

0:52.4

Pleasure to be here. Our topic for today is the financial crisis. I want to start with

0:57.3

a point you make recently that we need to put it in historical perspective. Why is that?

1:02.4

Well, whenever you have a financial crisis, you have one event. Of course, it can be different

1:08.4

across different countries, but essentially one event in about 20 different explanations.

1:14.3

They all have probably some truth to them, and then the question is, what weight do you

1:18.0

attach to each? By putting an event like this into historical perspective, you know what

1:23.7

rocks to look under. You know sort of a priori what weight to attach to different things, because

1:30.3

we've seen this sort of thing before. And so by putting this crisis on, if you like, the

1:35.6

historical regression line of other crises, we, I think, get a lot more useful perspective

1:43.2

on what was really important and what wasn't.

1:46.5

So what do they have in common that we ought to be focusing on this time?

1:50.0

I think what's clear is, first, banking crises are different from other crises historically,

1:57.0

and this shares that. In that, while all financial crises, banking crises, stock market

2:04.5

crises, real estate crises, sovereign debt crises, they all have a cyclical sort of timing

...

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