New York mayor warns of financial woes to come
During his delivery of the Leslie Whittington Memorial Lecture at Georgetown University in Washington, New York’s billionaire Mayor Michael Bloomberg warned of a “next wave” of financial problems related to Wall Street’s decline this week. He also called for more economic foresight and responsibility by the government and Americans as a whole.
Bloomberg’s speech followed the announcements this week that New York-based investment firm Lehman Brothers was filing for bankruptcy, and the federal government was stepping in to bail out faltering insurance giant New York-based American International Group (AIG).
While, as a capitalist, he ordinarily does not support rewarding people who take risks and fail, Bloomberg said the AIG bailout was necessary. “AIG was just too big to fail,” Bloomberg said. “The reason AIG was different from Lehman Brothers is AIG’s business is a worldwide business where the insurance contracts that they wrote were terribly important to the holdings of banks around the world, and if the insurance policies weren’t any good, then the value of the assets of all of these banks would have to be written down, and the banks would find themselves unable to stay in business or make loans or do the kind of things banks normally do to keep economies going.”
The future may hold further problems as America’s financial uncertainty spreads to overseas investors that have been buying our debt, Bloomberg said. “It’s not clear who’s going to be buying our debt,” he said. “And some of this, where it really hasn’t hurt America as badly as you think, given that the subprime mortgage crisis started here, it just may be that the next wave my come back and bite us.”
While Congress may now be seeking culpability for economic failures, such as the failure of Fannie and Freddie, all Americans share some portion of the blame, he said. “We have, on both sides of the aisle, on both ends of Pennsylvania Avenue, thrown caution to the wind. We pay lip service to responsibility,” he said. “We’re all part of this culture we seem to have developed in this world of ‘I want it now, there is no risk that is too great to run because it’s always going to work out, and somebody’s going to help us if it doesn’t work out.'”
A video of Bloomberg’s speech is available at