If you ask Eliot Spitzer ’81, there is one major lesson to take from the recent financial crisis: “Princeton economists are better than Harvard economists.” Or at least that’s what the former New York governor and attorney general, and current Slate columnist, had to say Saturday morning in a packed lecture in McDonnell Hall.
Comparing economics professor Paul Krugman, former federal reserve chairman Paul Volcker ’49 and former economics professor Joseph Stiglitz to National Economic Council chair (and former Harvard president) Larry Summers, Spitzer had one particularly Old Nassau-spirited suggestion for fixing the economy: “Take all the Harvard economists out of Washington, and send them down to Princeton,” he said. “Summers is wrong.”
In the Class of 2000 Millennial Lecture, “Lessons from the Economic Crisis,” Spitzer — who attended Harvard Law School after Princeton — also explained what he believed to be the other problems with the financial system, and with its current road to recovery.
Spitzer included anecdotes from his time as New York’s attorney general in describing his three rules for the framework of government work. First, he said, only government can enforce the rules of integrity and transparency in the marketplace. “Self regulation was a farce, it was a joke,” he explained. “It never worked.” He also noted that private actors do not always completely measure the impact they have on others, and that the private sector often fails at maintaining what the public may see as “core values.” These maxims support the need for government regulation, he said.
Regarding the government’s bank bailouts, Spitzer explained that “there should be no doubt among reasonable people [that] we needed to bail out the banks,” but that inserting the money into the system was the “easy part.” He noted that now comes the difficult part — figuring out how to properly regulate the financial system so that a similar crisis does not occur down the road, something of which he seemed wary.
Spitzer was not overly optimistic about current reform, which he said “rearranges the deck chairs on the Titanic,” while addressing just some of the important issues. He noted that the financial sector still must reconcile the banks’ “fundamental asymmetry,” which holds that the banks’ gain is privatized while their risk, and the losses that come along with it, falls to the public sector. Spitzer said much of the blame should go to those currently in power, such as Treasury Secretary Tim Geithner. Spitzer’s analysis of Geithner’s performance in effecting reform was blunt: “He blew it.”
by Gabriel Debenedetti