Without a "grand vision" and determined leadership,
America's economic woes will not end, New York Mayor Michael Bloomberg told a Georgetown audience Sept. 17.
Bloomberg's remarks came as major investment and financial firms in his city either collapsed or came close to it in the preceding days. While expressing sympathy for workers who lost their jobs, the mayor said it's time for some tough decisions.
Among those decisions is which firms the government should bail out. Earlier in the week, Lehman Brothers collapsed without federal intervention, but the government plucked American International Group (AIG) from the brink with an $85 billion bailout. Bloomberg said he agrees with both decisions and that AIG's collapse, unlike Lehman Brothers, would have had worldwide implications.
"The federal government can't bail everyone out, and I think we have to have an intelligent discussion on which ones (should be) … I don't think you should reward people who take risks and lose," he said. "But the question is what do you do now?"
If underlying causes of economic declines go unaddressed, the U.S. may be headed for more financial pain, especially if foreign investors lose confidence, Bloomberg warned. Global markets also are suffering, he added, with China's falling 60 to 65 percent in the past year alone.
"It's not clear who's going to be buying our debt," the mayor said. "It may very well be that the next wave is going to come back and bite us."
Hearing Bloomberg's take on the economy proved to be a hot ticket on the Hilltop. The line into Gaston Hall stretched outside of Healy Hall, down the lawn and nearly reached Lauinger Memorial Library.
Georgetown President
John J. DeGioia conducted an interview-style discussion with Bloomberg, touching on many sides of the financial crisis.
"We're all part of this culture where it's ‘I want it now' and there is a risk to that," Bloomberg said of firms providing loans to people with bad credit. "You can't go on forever not addressing the key issues in this country."
Those issues, he explained, include addressing anti-immigration attitudes, health care and education, all of which may help improve the overall economy.
James Angel, associate professor of finance, agreed that there are endemic structural problems with the economy. He pointed to a study Bloomberg co-sponsored with
Sen. Charles Schumer (D-N.Y.) in 2007 that highlighted weaknesses in the U.S. financial regulatory structure.
"We have hundreds of financial regulatory agencies at the state and federal level," Angel said. "Many of these agencies do not work well with each other (and) they get into turf battles. And still, many things fall between the cracks … and many of the things that led to our financial crisis are things that fell between the cracks."
Now people are panicking and creating a "self-made reality" that is putting the markets in turmoil, Bloomberg added. On the day of his speech, the Dow fell 450 points. The day before, it had plunged about 500 points.
Financial employees, some now out of work, may also have lost their savings in the market tumble, Bloomberg said, because they put too much money into their own companies.
"I urge all of you to think about this – there's no one investment, whether it's your time or money, that you should put all of your store in," he advised the Georgetown audience.
The Georgetown Public Policy Institute (GPPI) hosted Bloomberg's speech as this year's Whittington Lecture. The lecture is named for
Leslie Whittington, GPPI associate dean, associate professor and an economist, who was killed on Sept. 11, 2001, along with her husband and two young daughters when their plane was flown into the Pentagon.
William Gormley, interim GPPI dean, said he often thinks of Whittington and believes, as an economist, she'd be engrossed with the current events.
