In Part 1 of my interview with Rep. Alan Grayson published on Monday, we talked about Syria and national security policy. In Part 2, we turn to domestic matters. Grayson is actually one of the only trained economists in Congress, graduating from Harvard with an economics degree.
We talked about whether Dodd-Frank stabilized the financial system, the role of the Federal Reserve in the economy, and his surprising view on the fears of a government shutdown. We also talked about his recent partnerships with House Republicans. Below is a transcript of our conversation.
With the five-year anniversary of the Lehman Brothers collapse upon us, everyone is talking about whether we remain vulnerable to another crisis. You were on the Financial Services Committee when Dodd-Frank passed in 2010. Has it worked to make the financial system safer, or has nothing much changed?
Yes, nothing has changed. The only thing that has changed is the passage of time. Sometimes time does not heal. We still have the problem of some institutions being too big to fail, and nothing has been done to make them smaller or less interconnected. Nothing has changed the fact that, because of the sense in the market that some institutions are too big to fail, the big get bigger and the small get smaller. The cost of capital is smaller for institutions perceived as government-backed, than for ones not as credit-worthy, with counter-party risk.
The one good thing that’s happened in the past five years, in the sense of making people hopeful that the economy might survive a collapse, is that the Federal Reserve’s unconventional monetary policy put us back on a low-level track toward growth. They showed that monetary policy in extremis can work to some degree.
