Volcker: Financial Innovation Disastrous

Wednesday, 16 Dec 2009 08:27 AM

By Marc Davis

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
All those mind-boggling financial products that nobody understood were no help to the U.S. economy, and led it to the sorry state from which it is now attempting to recover.

So says Paul Volcker, chairman of the President's Economic Recovery Advisory Board, in an interview with The Wall Street Journal, at the Journal's Future of Finance Initiative conference in London recently, according to a report in MarketWatch.

There is not a "shred of evidence" that innovation provided any benefit, said Volcker, who was Chairman of the Federal Reserve under Presidents Carter and Reagan.

Volcker pointed to credit default swaps and collateralized debt obligations as among the innovative financial products that, "took us right to the brink of disaster."

The economy "was quite good in the 1980's without credit-default swaps and without securitization and without CDOs," Volcker said.

Volcker was quick to assert, however, that he was not opposed to innovation per se.

"I do not want to stop you all from innovating, but do it within a structure that will not put the entire world economy at risk."

Summing up his thumbs-down view on previous innovations, Volcker said, "The most important financial innovation I've seen in the last 25 years is the automatic teller machine."

Once Warren Buffett agreed with Volcker. Credit default swaps "are financial weapons of mass destruction," Buffett once said.

But with a change in SEC regulations of the notorious CDS earlier this year, Buffett's Berkshire Hathaway has issued $4 billion in CDS, according to a Forbes.com report.

© 2014 Newsmax. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web
Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved