Tags: Economists | Warn | Crisis

Economists Warn Another Crisis on the Way

Wednesday, 03 Mar 2010 03:20 PM

By Dan Weil

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Without strong financial regulatory reform, the economy may fall right back into recession, warns a report from prominent economists, bankers and former regulators.

The group includes Nobel laureate Joseph Stiglitz, United Nations economist Rob Johnson and bank bailout watchdog Elizabeth Warren.

The problem is that banks continue to use borrowed money to take outsized risk, the report says.

So without regulation to halt that practice, the financial system is caught in a “doomsday cycle” that ends with bailouts, the report says.

"Risk-taking at banks will soon be larger than ever," the report says, according to ABC News.

In the absence of more vigilant regulation, “Another crisis — a bigger crisis that weakens both our financial sector and our larger economy — is more than predictable, it is inevitable," Johnson wrote in the report.

"Our government leaders have shown little capacity to fix the flaws in our market system."

Johnson has choice words for officials in Washington. “Our government leaders have shown little capacity to fix the flaws in our market system."

Stiglitz called the report "an important point of departure for a debate on where we are on the road to regulatory reform."

Richmond Federal Reserve President Arthur Lacker takes issue with criticism launched at the Fed.

“I think we are being made a scapegoat in the current political environment,” he told Bloomberg. “I think we are accountable.”

© 2014 Moneynews. All rights reserved.

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