Sunday, March 7, 2010

U.S. Locked in Doomsday Cycle Due to Lack of Reform and Moral Hazzard by Banks

http://www.commondreams.org/headline/2010/03/03-0

by Matthew Jaffe

"Even as many Americans still struggle to recover from the country's worst economic downturn since the Great Depression, another crisis -- one that will be even worse than the current one -- is looming, according to a new report from a group of leading economists, financiers, and former federal regulators...."

"The report warns that the country is now immersed in a 'doomsday cycle' wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management -- and when the risks go wrong, the banks receive taxpayer bailouts from the government.

"'Risk-taking at banks,' the report cautions, 'will soon be larger than ever.'"

"Without more stringent reforms, aanother crisis -- a bigger crisis that weakens both our financial sector and our larger economy -- is more than predictable, it is inevitable,' Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute."

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