By the end of the May 2009 NYRB/PEN symposium on "The Crisis and How to Deal with It",, Niall Ferguson was interrupting Bill Bradley to say that he was "not to blame for AIG" and condemning Paul Krugman's calls for expansionary fiscal policy when monetary policy was tapped out at the zero lower bound as "the Soviet model".
None of that made it into the version of the symposium published in the New York Review of Books.
Here's the end of the symposium, with what the NYRB dropped between what was said and what it printed in bold:
Niall Ferguson: Well, I tell you what, I feel depressed after what I’ve heard tonight. I don’t know about you ladies and gentlemen. We are now contemplating a massive expansion of the state to substitute for the private sector, because that’s the only thing Paul [Krugman] thinks will deliver growth. We’re going to reregulate the markets. We’re going to go back to those good old days. [Light applause]
Oh yeah, you applaud because you think that’s a great idea. Where were you in the 1970’s? [more applause, hoots from the audience] Just where were you in the 1970s when all these wonderful regulations were in place? I don’t remember that going too smoothly. But what else are we going to do? Oh, we’re going to print money. Almost limitlessly we’ll print money. That’s going to be fine, too. And when we’re done with that, we’re going to raise taxes. What a fabulous package we have in store for us.
You know, back in late 2007, I was asked what my big concern was, and I said: “My concern is that we’re going to get the 1970s for fear of the 1930s.” And that is exactly where the majority of people on this panel are steering this country. It’s very easy to forget, in your iron indignation at the failure of the market, where the true mainsprings of economic growth lie. Ladies and gentleman, the lesson of economic history is very clear. Economic growth does not come from state-led infrastructure investment. It comes from technological innovation, and gains in productivity, and these things come from the private sector, not from the state. If you want to try the Soviet model, fine. By all means.
[applause] No, but wait a second. Wait a second if you want. No but let me finish…
Jeff Madrick: I think everybody on this panel is biting his tongue and let’s let Bill…
Niall Ferguson: Well Jeff…
Jeff Madrick: Including myself.
Niall Ferguson: Jeff, we know where you…
Jeff Madrick: Let’s let Bill speak. We’re doing you a good turn by not extending this ten minutes. Bill has the final word [shouts, applause from audience].
Niall Ferguson: Jeff, Jeff, we know where you stand on big government. And remember your role as that of anchor. The critical point here is…
Jeff Madrick: Please, Niall, my role as anchor is now to pass it on to Bill. I think we understand your point.
Bill Bradley: As we look at the future, we also have to look at the mistakes policymakers made in the last ten years. It’s not news that people are greedy. But we made conscious decisions not to put limits on that natural human impulse. What were the mistakes? In 1999, we allowed investment banks, banks, insurance companies to combine: we eliminated the Glass-Steagall Act, which prohibited commercial banks from operating as investment banks. Why was Glass-Steagall put into law? Because the last time we didn’t limit greed we got into trouble, the Great Depression.
The second mistake was in 1999, the explicit decision by the Clinton administration and Congress not to regulate derivatives, in particular credit default swaps. In 2002 they were worth $1 trillion, and today they’re worth $33 trillion, and that decision not to regulate derivatives created the following sequence: You have mortgages; then a thousand mortgages are packaged and sold as a mortgage-backed security; a thousand mortgage-backed securities are packaged and sold as a collateral debt obligation [CDOs]; then a thousand collateral debt obligations are packaged and sold as a CDO squared; and insuring each one of those bundles are credit default swaps, which are a part of that $33 trillion. And our government deliberately decided not to regulate this chain of investments.
One result was that the 374 people in the London office of AIG who were responsible for AIG derivatives destroyed a company that had 116,000 employees in 120 countries.
Niall Ferguson: I’m not to blame for AIG.
Bill Bradley: No, no.
Niall Ferguson: Why did I accept this invitation?
Bill Bradley: Why? Because there was no regulation at all.
The third decision was in 2004. The SEC allowed banks to go from 10 to 1 leverage to 30 to 1 leverage. And guess what? Once they were allowed to do it, they did it. So if we’re going to look at the future, we might think of undoing those three mistakes.
Finally, we might want to remember that the chairman of the Federal Reserve is supposed to remove the punch bowl from the party when the party gets out of control. And that did not happen in the Greenspan years. The opposite happened.
It is conventional--at least in the circles in which I travel--to clean-up transcripts. Raw human speech looks silly in print. You eliminate the "ummms" and the "you knows" and the false starts. You collapse into one grammatical sentence those times when people start a sentence, go back and start it again, and then go back and start it again and finally finish it.
The convention is to edit the transcription of what they said into something different--into what they would have written if they had been not speaking but writing, sentence by sentence and paragraph by paragraph, and editing as they go.
But this seems to go rather beyond that, so much so as to convey a substantially distorted impression of how the symposium actually went...