Nobel Laureate Stiglitz Praises G20 Meeting

It’s a sign of the times that a panel on the financial crisis could draw 200 people to the Harvard Kennedy School in 25-degree weather.

Nobel laureate Joseph Stiglitz headlined a panel of financial experts in the John F. Kennedy Jr. Forum yesterday. He said that last weekend’s G20 summit was a welcome sight for the beleaguered global economy, even if it has yet to produce noticeable results.

“It is very important that there was a G20 meeting, not G7, because the G7 [countries] are all bankrupt now,” said Stiglitz, a Columbia University professor.

He said that the inclusion of 13 rising economies was particularly meaningful because wealth has been shifting from America and Europe to Asia and the Middle East.

“It is probably the best decision [President Bush] has made in his entire presidency,” chimed in Robert Dugger, former policy director for the American Bankers Association.

The panel, entitled “Financial Re-Regulation: The Economics and the Politics,” was moderated by Richard Parker, a senior fellow at the Shorenstein Center and a HKS lecturer. Former U.S. Senate Staff Attorney Jack Blum—who has worked on bank and securities firm compliance, international financial crime, money laundering, and offshore tax evasion—rounded out the panel.

The panel spent much of the time addressing the root causes of the economic crisis, and generally agreed that the lack of transparency in the financial markets was a top reason for the U.S. economy’s troubles.

“We just gathered whatever stuff we could gather and made a sausage out of it, and we wrapped it up as filet mignon, and we sold it to the entire world,” Dugger said. “And in June last year, they hear about our subprime mortgage crisis. They open up their filet mignon and go, hey, this is not filet mignon, this is a sausage!”

Dugger and Stiglitz agreed that American companies should be as transparent as possible, but there are practical administrative problems that are tough to overcome, and a perfect solution is extraordinarily difficult.

“All we have to do is to tell the banks that ‘You can’t deal with these countries that did not sign this global contract that promises financial transparency,’” Stiglitz said, “but it is not as easy as it sounds.”

The panel concluded that in order to regain foreign countries’ trust, and ultimately, to regain market losses, financial transparency and regulations are crucial.