Jagger Wright Welcome to Flawed, a podcast about how the 2008 financial crisis happened, and why it wasn't just a mistake. I'm Jagger Wright, and in this series, I talk with economists, authors, and experts who help break down the structural flaws inside modern capitalism that made the crash not just possible, but inevitable. Today on Flawed, I'm lucky enough to be joined by economist Dean Baker, Co-Founder of the Center for Economic and Policy Research, and one of the earliest voices to warn about the housing bubble before the 2008 financial crisis. In this interview, we talk about how he saw the crisis coming, what he believes truly caused it, and whether the flaws that led to 2008 are still with us today. You know, you warned about this housing bubble years before the crisis. What specific evidence stood out to you? Like, what did you see in the numbers or in society that made you come to this conclusion? Dean Baker Well, most immediately, there was a rapid run-up in house prices, and just to give some context, we had had a bubble in the stock market, and it collapsed in 2000. 2000 to 2002, it didn't happen all at once, took two years. In fact, I don't think it bottomed out, actually, till 2003. But in any case, the crash began in 2000, and we got a recession because of that, and the conventional wisdom, if you look at the GDP numbers, it doesn't look like a particularly bad recession, we didn't even have two consecutive quarters of negative growth. But from a labor market perspective, it did look very bad. We lost, uh, I forget what the number of jobs, two or three million, but in any case, we didn't get them back for four full years. So that was the longest period without job growth that the U.S. had experienced up to that point since the Great Depression. So to my view, that was a pretty big deal. But anyhow, having lived through that and warned of that, you know, 'cause stock prices looked nutty, and then the internet bubble wasn't as big as the AI bubble that we're seeing now— Jagger Wright Hmm. Dean Baker …but it was a pretty serious bubble. And, you know, it was clear to me it was gonna burst, and it was gonna be pretty bad when it did. So having just been through that, I was noticing the run-up in house prices, and it was hard to miss. I mean, it was happening in large parts of the country. And looking, again, we were still coming out of that recession very, very slowly, and in fact, Greenspan, who was chair of the Fed at the time, was touting the fact that people were spending based on their increase in home equity, people borrowing against their home equity. So that's what got me to look at it closely, and Greenspan was asked in one of those congressional testimonies about whether he thought there was a bubble, and he gave four reasons that made no sense... Jagger Wright Welcome to Flawed, a podcast about how the 2008 financial crisis happened, and why it wasn't just a mistake. I'm Jagger Wright, and in this series, I talk with economists, authors, and experts who help break down the structural flaws inside modern capitalism that made the crash not just possible, but inevitable. Today on Flawed, I'm lucky enough to be joined by economist Dean Baker, Co-Founder of the Center for Economic and Policy Research, and one of the earliest voices to warn about the housing bubble before the 2008 financial crisis. In this interview, we talk about how he saw the crisis coming, what he believes truly caused it, and whether the flaws that led to 2008 are still with us today. You know, you were warned, or you warned about this housing bubble years before the crisis. What specific evidence stood out to you? Like, what did you see in the numbers or in different s- in the s- in society that made you come to this conclusion? Dean Baker Well, most immediately, there was a rapid run-up in house prices, and just to give some context, we had h- had a bubble in the stock market, and it collapsed in 2000. 2000 to 2002, it didn't happen all at once, took two years. In fact, I don't think it bottomed out, actually, till 2003. But in any case, the crash began in 2000, and we got a recession because of that, and the conventional wisdom, if you look at the GDP numbers, it doesn't look like a particularly bad recession, we didn't even have two consecutive quarters of negative growth. But from a labor market perspective, it did look very bad. We, we lost, uh, I forget what the number of jobs, two or three million, but in any case, we didn't get them back for four full years. So that was the longest period without job growth that the US had experienced up, up to that point since the Great Depression. So to my view, that was a pretty big deal. Um, but anyhow, having, you know, lived through that and warned of that, you know, 'cause I... Stock prices looked nutty, and then the internet bubble wasn't as big as the AI bubble that we're seeing now- Jagger Wright Hmm. Dean Baker ... but it was pretty serious bubble. And, you know, it was clear to me, you know, it was gonna burst, and it was gonna be pretty bad when it did. So having just been through that, I was noticing the run-up in house prices, and it was hard to miss. I mean, it was happening in large parts of the country. And looking, you know, again, we were still coming out of that recession very, very slowly, and, you know, in fact, Greenspan, who was chair of the Fed at the time, was touting the fact that people were spending based on, on their, their increase in equity, home equity, people borrowing against their home equity. So that's what got me to look at it closely, and Greenspan was asked in one of those congressional testimonies about whether he thought there was a bubble, and he gave four reasons that made no sense, uh, if I remember correctly. He said there's a limit on buildable land, you go, "Well, that's not new." I mean, (laughs) you know? Jagger Wright Yeah. Dean Baker New York City was pretty crowded, you lived there, you know, it was pretty crowded 100 years ago, you know? So, so yeah, th- that's not something new. Um, he said environmental restrictions on building, you go, "Okay," but, uh, you know, it wasn't the heyday of environmentalism. Republicans had taken over most state legislatures, and, you know, uh, Bush, uh, Bush too, was not a big environmentalist. So, you know, that didn't make any sense. They talked about, uh, population growth, and you know, population's not particularly growing rapidly, and, you know, he mentioned immigration, you go, "Immigrants aren't buying $400,000 homes," at least not Jagger Wright Yeah. Dean Baker ... immigrants. And, uh, the last thing was rising real incomes, and again, you go, "Okay, fine. Real incomes are rising, but not especially rapidly, certainly not after 2000." So none of those things made any sense, so that was what got me to look at it very closely. And, you know, I look back, and at that time, I could construct data on house prices going back to the early '50s. There, there was government data that I could use and piece together, I won't go into details. But house prices from the early '50s until the mid-'90s, they just kept pace with the overall rate of inflation. And suddenly they drastically outpaced inflation, you know, from two, ni- beginning in '96, but, you know, you don't make much over a year, two years, three years, but by, by 2002, it was a noticeable difference. It was about 30%. And there was no remotely corresponding increase in rents. Jagger Wright Mm-hmm. Dean Baker So, you know, the story o- of a, you know, d- demand-driven bulb, uh, run-up in house prices, presumably something comparable has to be going on in rents. And just to be clear, I don't mean one to one. But if house prices are drastically out, out, uh, pacing inflation, I'd expect rents to be at least somewhat outpacing, and that, that just wasn't true at the time. So that's what really got me looking at it closely. And, you know, I began to look at other things, vacancy rates, um, they weren't low. They were, they in fact were high and rising, um, so that didn't make sense, um, and then you look at the financing, which, you know, it, it, it was already shaky by 2002. You saw record levels of subprime lending, um, but it went through the roof as we went further along, '03, '04, '05. And this, none of this was secret, by the way. I mean, this wasn't... I didn't have, you know, you know, this was all publicly available data. And in fact, the, the business press, they were boasting about it. So they were saying, you know, "Oh, we could give loans to, you know, low-income people who couldn't really previously qualify, we're giving loans with zero down, even negative down." That, that- that's really true. Jagger Wright But I, uh... Dean Baker Sorry, someone the other day, they thought I didn't know what I was talking about. No, you can go back and look. Jagger Wright Mm-hmm. Dean Baker So you'd get a standard mortgage for 80 or 90%, and then you'd get a secondary... They had another term for it, I'm forgetting. Uh, I'm sure they still exist, but they were very common at the time, that could, can make up the gap and then some. So people getting mortgages, they would buy, uh, buy a, a home where they actually had mortgaged 100, 300, 400, 500% of the value. So you're starting out underwater. So, you know, s- a- and again, I mentioned the subprime...That soared to, I believe it came to 25% of, of, uh, buyers by 2006, 2005, 2006, the peak of the bubble. And probably even more disconcerting, there's a category of Alt-A. I don't know how close they get, so it's a little nerdy, but, um, Alt-A is, uh, uh, well, nearly a very small category of mortgages. So, these are mortgages that in principle, um, people would be able to get. They'd be treated as, uh, as a, you know, top grade creditors, borrowers. But because they can't fully document a loan, they, they get what's called an Alt-A loan, which is at a somewhat higher interest rate, typically one to two percentage points higher. And the conventional wisdom on that is that most of the people qualifying for those are small business owners. And the reason, you know, the polite reason is that their income fluctuates so they don't have a steady income. The less polite explanation is they lie. Jagger Wright Mm-hmm. Dean Baker So, so someone, uh, you know, on their tax forms, they say they're earning 100,000 but they say, "No, actually I'm earning 300," or something, you know, but they're not reporting that so they can't bring in their tax returns. Long and short though, it's ordinarily a relatively small share of mortgages, but that just exploded in, in- Jagger Wright Yeah. Dean Baker ... on this Jagger Wright Yeah. Dean Baker ... period. And that, to my mind was like, you know, flashing red light. Like, we didn't suddenly have all these more small businesses, you know? The, these were, they were bogus loans. They were, you know, and, and again, this was joked about in the industry. They, they referred to these as liar loans. Jagger Wright Yeah. Dean Baker You know? Yeah, I've heard of those. Jagger Wright And, and did you see, uh, ninja loans? No income or a job. Dean Baker Yes, ninja loans. Jagger Wright Yeah, I've, I've also seen those. So, so this is- Dean Baker It's crazy. Jagger Wright Yeah. Dean Baker So, so none of this was secret, you know? And then there were other parts of it. The, um, uh, assessors, there were stories about this that, uh, or appraisers, I'm sorry. You know, when you get a mortgage, typically appraisers are hired by, uh, under contract. So, they're independent contractors and they're asked to appraise a property and they knew that they wanted high appraisals. So, you had appraisers that tried to be honest. No one would call them back. So, they knew, you know, maybe a home they'd see was worth 300,000, they'd say 350 because they knew they wanted a high appraisal. So, and, and again, all this was being reported. You could find stories about it. I mean, it's not every day everywhere, but- Jagger Wright Mm-hmm. Dean Baker ... none of this was ... So, you know, as I say, I first decided there's a bubble when I heard Greenspan give these reasons, none of which made sense and, you know- Jagger Wright Yeah. Dean Baker ... I'm not a Greenspan worshiper or anything (laughs) but I don't think he's a fool. So, I think if he had good reasons, he'd have given good reasons. So, here, you know, he's the chair of the Fed, and that time, a very long-standing Fed chair. If, if, if he can't come up with a good reason to justify this rise in house prices, I'm prepared to say there's not a good reason. It's a bubble. So, that, that's what really got me on this. And again, you know, there's just so much material supporting that in terms of, you know, the bad loans being given and, um, you know, well, we found this out later, I didn't know that at the time I got to say, but the, um, the bond rating agencies played a crucial role in this because they were prepared to, to sign off on anything, you know, and they knew they were signing off on junk. So, so, you know, again, you, you probably know the story that- Jagger Wright Mm. Dean Baker ... the reason everyone was happy to give out bad loans, because ordinarily it's 180 degrees opposite. They don't, you know, they're, they'll give you a working over. They don't want to give you a loan unless they're absolutely sure you could pay it back. But the reason why they were so happy to do that during this period was they could put anything in a mortgage-backed security and sell it off to, you know, the, the, or sell it off to the investment banks who put it in a mortgage-backed security and then- Jagger Wright Yeah. And then don't they sell those to the, uh, industrial investors like, uh, pension funds and overseas investors? Dean Baker Exactly. They'd go all over the world, so- Jagger Wright Yeah. Dean Baker ... you know, and, and they were certified as investment grade by the bond rating agencies, so, you know, all was good. Jagger Wright Yeah. Something that I found funny when I was looking at the trials after the crisis were all the credit region- rating agencies talking about how it was like their First Amendment right to rate something, rate a mortgage back. It was like a triple A. I just thought that was so, that was shocking to me. Dean Baker But- It, it... Jagger Wright Yeah. Dean Baker Yeah. It, it was incredible. I mean, the, the lack of r- The, the fact no one took responsibility and no one's given re- I mean, uh, one of, to my view, the major failings of the, the Obama administration was they walked in there and basically gave everyone an amnesty. And, you know, this was- Jagger Wright Yeah. Dean Baker ... you know, you don't have to go after the small, you know. I, uh, you know, you had, uh... It was decentralized in the sense that you had a lot of offices, mortgage, uh, mortgage ag- agencies. Um, I'm getting old and forgetting the terms. Uh, uh, mortgage brokers, you know, met some independent contractors and okay, you don't make a big point going after them. But, you know, Citigroup, you know, these, these are people- Jagger Wright Yeah, yeah, yeah. Dean Baker They're not, you know, I mean, maybe the people want to say they're fools, but they shouldn't be fools. I mean, you're running a bank with trillions of dollars of assets. Someone should be able to take responsibility there and, you know, no one did. No one went to jail. No one, uh, you know, a few people lost their jobs and okay, but, you know, they still walked away with billions. Jagger Wright Billions, like hundreds of millions. Dean Baker Yeah. Jagger Wright It was crazy. Dean Baker It's crazy. Jagger Wright You mentioned the Obama campaign and the years following, like 2008, 2009. Uh, what do you think they could have done differently? What do you think the government... Like, do you think they should have bailed out these institutions for one on one, like dollar amounts for their insurance or... Dean Baker I should have let the... I think they should have let the banks fail, um- Jagger Wright Mm-hmm. Dean Baker ... and picked up the pieces. And, you know, there was a story, and I wish I had been... Not that I would have mattered, but, you know, I, I wish I had been more vocal. I did say this but I was not as vocal as I could have been. Again, I, I doubt it would have mattered, but... You know, they spread this story that was just repeated as fact that if we didn't bail out the banks, we'd have the second Great Depression. Jagger Wright Wow. Dean Baker And that's, there was just a lot. Jagger Wright Mm-hmm. Dean Baker You know, the, you know, because we know how to get out of a Great Depression because we did it. You spend- Jagger Wright Yeah. Dean Baker ... money. You know, and, and you just had people who, who certainly should have known better. I can't say whether, what they knew or didn't know. But you go, look, we, we, we were in the Great Depression for a decade.... because we were scared to do the spending necessary to get us out. What finally got us out was World War II. We spent like crazy. Well, it wasn't the war. There's not a magic that if you spend it on a war, it gets you out. It was spending. You know, we could have spent it on building up our infrastructure, extending healthcare, you know, building up our education system. Could have spent it on all those things and, and that wasn't- Jagger Wright Kind of like the iron fist? Dean Baker Yeah, yeah. Jagger Wright Yeah. Dean Baker You know, but... You know, anyhow, but you had this repeated as though it made sense that, "Oh, no, if we don't do this, you know, it'll be a decade of double digit..." And I don't mean opinion pieces. I mean, that was just assert as fact. And national- I'm not talking about Fox, National Public Radio, New York Times, you know, the major networks, you know, they were all just asserting that as fact. And I remember, uh, the, the initial bailout package, of course, was under Bush. It was in, uh, the fall of, uh, 2008, before the election about, uh, six weeks. I forget the exact date, but, you know, uh, obviously you can look that up. Anyhow, it originally went down, um... Jagger Wright Mm-hmm. Dean Baker The Republicans wouldn't support it. Most Democrats did. A lot of Republicans didn't. But anyhow, they had a, um, the, the Democratic caucus, you know, Pelosi had, uh, wrangled them and, uh, you know, had them sit through lectures from, uh, Larry Summers and Gene Sperling, and I'm not sure who else they had in there. But a lot of the bigwigs in the... among Democratic economists. Sperling's not actually an economist, but whatever. He's held economic positions. I don't care. So they were all telling them, "You gotta do this, you gotta do this, you gotta do this." Anyhow, the Democrats in, in the House formed a Skeptics Caucus. Um, I think this was the House. Bernie might have been there. Bernie Sanders may have been there too. But in any case, it was, it was, it was certainly most of the House, if not entirely. And they wanted to hear from people who, who were saying, "You don't have to do this." So I got invited to that. Jamie Goldbright, if you've come across his name, he was also invited. And I think it was Bill Harris, who was head of the FDIC under Reagan. And all three of us were saying, "You don't have to do this." Um, although Jamie in his way was kind of convoluted. But I (laughs)- Jagger Wright (laughs) Dean Baker ... I, Jim and I think were, were pretty clear. You don't have to do it. You shouldn't do it. Uh, uh, Jamie was kind of saying, "You don't have to do it, but you should do it." Um, but not worth going there. Anyhow, we, we were talking with them for, I don't know, probably about two or three hours. And it was striking because, you know, I've talked to many members of Congress over the years. But most often you talk to their staff, and usually that's who you'd rather talk to because, you know- Jagger Wright Yeah. Dean Baker ... members... I mean, in fairness to them, they're dealing with 20 different issues, so they can't... You know, they aren't gonna be expert. They're expert on one or two or three things maybe. You know, they know something about them. But, you know, they rely... They have a staff member that's supposed to tell them about banking, a staff member that's supposed to tell them about Social Security, you know. So that's who you'd rather talk to, the staff member, not the... You know, but in this case, it actually was the members. They were really freaked, you know. So we talked to them for probably two hours, and then they went back to the meeting, you know, with the Democratic caucus as a whole, which was going on, like, all day, you know. It was probably six, seven hours. And they asked us to stay because they wanted us to talk to the whole, whole meeting. And they were negotiating with Pelosi. And finally, at like 8:30 in the evening (laughs), they let us in to talk. Most of them had already left, or maybe half of them, and many of them came out- Jagger Wright A long time. Dean Baker Yeah, yeah, you know. So several of them came up to me afterwards, as well as the other speakers, Jamie and Bill Harris, and said, "Well, we wish we could have had you here earlier." (laughs) Anyhow, it was all digression, but they were determined to get there through. And, you know, they were pushing this, you know, second Great Depression line, which was complete nonsense. So in my view, you know, look, I look at the financial system, and I think this is just straight economics. I don't think it's any sort of left wing, you know, uh, left field or something. The financial system exists to support the real economy. It's, it's, it's an intermediate good. It's like the trucking industry. So no one thinks we want a really big trucking ind- I mean, they look at you like you're nuts. You want a trucking industry that gets the stuff from point A to point B quickly. You know, that, that's why you want a trucking industry. And if you saw the trucking industry was exploding relative to the size of the economy, you'd start asking questions, like, "What's wrong with the trucking industry?" Well, we should think of the financial sector the same way. We want the financial sector to steer money from savers, people who can save, to those who are looking to invest, who need capital. It's simply, you know, it's a textbook story. And you don't want a big financial sector, because that's a drain on the rest of the economy. Now, if you think it's doing it better, fine. But did anyone think it was doing it better when we saw the, the explosion of, of the housing bubble, or for that matter, the dot-com bubble? I mean, they're hard-pressed to make that argument. So, you know, to my view, it would have been a fantastic thing to let these things, you know, Citigroup, you know, Bank of America, Merrill Lynch, the whole group of them, let them go under, pick up the pieces. We have the FDIC. So, you know, so, you know, would, would this work perfectly? Would no one ever go to their bank and not be able to... Sure, there'll be... You know, that's gonna happen. But that we could minimize that and address it quickly, because again, we, we have the system in place, and pick up the pieces and start from scratch and have a much smaller, you know, more efficient financial system. So that's what I would have done. Jagger Wright Mm-hmm. Dean Baker Um, on the issue of underwater homeowners, you know, I, I'm sure I'm not the only one who came up with this, but I had this proposal I called Right to Rent, where you would give, you would give someone who is underwater, who's facing foreclosure, that they would have the right to stay in their house at the market rent for, say, five years. I mean, that's an arbitrary period. Could be seven, could be three. You know, I'd prefer longer. Others might argue shorter. But anyhow, say of five years. That would give the banks enormous incentive to renegotiate the loans, because they couldn't just throw them out on the street, and they don't really want to be landlords. Jagger Wright Yeah. Dean Baker So that likely could have prevented an awful lot of the foreclosures. But then (laughs)... I knew someone in the administration, um, that got nixed by Larry Summers. Obama actually liked it, but someone said- Jagger Wright Right. Dean Baker ... oh, our, our, you know, our HAMP plan is much, much better. He didn't even understand that they had no one there to implement that. So, so, you know, again, I don't know how much you did your, your homework on this, but they had, you know, they had totally, um-... uh, I can't think of the right term for it. Sort of, uh, cleaned out the whole structure of, of mortgage processing. You know, the idea was to make it as efficient as possible, minimize cost. So, that you had people that serviced the mortgages that literally nothing about them. They were just told, you know, someone's supposed to pay 2,000 a month. If it's not there by the 10th, you send them a late notice. If they don't respond to that in 30 days ... I'm, I'm picking these dates, I don't know. Jagger Wright Yeah, yeah, yeah. I got you. Dean Baker 30 days, you get second notice. And if they haven't responded to that in 30 days, then they get a foreclosure notice. We're gonna, you know, foreclose on your house. And there's literally no one there to talk to, you know. So, it's not as though you could say, "Oh, I could ..." You know, you call them up and you say, "You know, I could pay you two-thirds now. If you give me another month, I could pay you the rest." And you know, there's no one there to talk to. So, you know, they passed this, uh, th- this program that's supposed to give incentives to, to renegotiate mortgages, but there was no one there even to do it. You know, now that changed a little bit over time. But at least initially, they literally didn't even have a structure in place. It wasn't like the old days where, you know, the bank held your mortgage and you- Jagger Wright Mm-hmm. Dean Baker ... might probably ?the bank. And if you go back, you know, 30, 40 years, so you go, oh, you know, look, uh, between jobs or something happened. And, you know, foreclosure's expensive, so they don't really wanna do that. But as, as, as they had set up a structure, they actually had incentives to foreclose 'cause people got paid for each action. So, you got paid for sending out a foreclosure notice. You got paid for carrying through the foreclosure. You had no interest in actually renegotiating the loan. So, you know, obviously Summers and those people didn't even know that when they designed the program. So, it was, you know, it- it did very little. I mean, eventually, you did save some homes, but it really- Jagger Wright That's terrible. Dean Baker Yeah, yeah, no, look- Jagger Wright It's crazy. How could they design a program that results in something like that? Dean Baker This is something with Summers. He thinks he knows everything, and he often (laughs) doesn't. You know, it's, he's, he's a really a ... I'm not good buddies with him, but I have had- Jagger Wright Yeah, yeah, yeah. Dean Baker ... and he's, he's a very arrogant guy. He's not stupid. I mean, he does know a lot. But, you know, he, he doesn't know ... I'll put it this way. He doesn't know as much as he thinks he knows. (laughs) There, there, there was a famous exchange at, uh, the, the, the Fed has a meeting, uh, in, uh, Wyoming, Jackson Hole, Wyoming every year. And there was a, a meeting in 2005 and Rajan Rajani, who, uh, I'm mangling his name, but he- he was an economist at the time. He was an economist at the University of Chicago. He was a well-known economist. He subsequently became head of the central bank in, uh, in India. Indian by birth, I should say. I don't know ... Indian background . Anyhow, um, R- Rajan Rajani did, uh, present a paper where he was arguing that, you know, we've really overstretched the, the, the credit system and it has, you know, serious risks, which turned out- Jagger Wright Yeah. Dean Baker ... obviously to be ... Anyhow, Summers got up and denounced him as a, as a financial Luddite. And, you know, needless to say that his, uh- Jagger Wright Wow. Dean Baker ... assessment didn't stand the time very well. Jagger Wright Yeah. That's interesting. I mean, for me, 2008, that's the year I was born, so it was a long time ago. I don't remember it well. But I was wondering more wide scale when all these different financial firms, you know, unintentionally or intentionally set up these systems that inherently make them more money, do you think that this is a form of, or like a, a deep-rooted problem in the modern capitalist society that we have right now? Or do you think that they were just kinda short-term mistakes, they were just overlooking, they just saw the money going up and that's why they did the things that they did? Or do you think that we have built a system that allows this to happen? Dean Baker Well, there are things that inevitably go together. So, you have people, you know, who like to call themself libertarian. So, I always have fun with them and go, "Okay, so you wanna get rid of the, you know, deposit insurance." They usually look at me like, "What? Huh? What? Who provides deposit insurance?" Right? You don't want the government- Jagger Wright Mm-hmm. Dean Baker …you know? And, and invariably, that's not what they... Now, there are a few people who say, "Oh, that could be done privately." And actually, an interesting story in that, because there was, I think it was Switzerland? Anyhow, there was one country that did have a private deposit insurance system, which went under, and the government bailed it out. (laughs) Jagger Wright Was it the Netherlands? Dean Baker Maybe it was the Netherlands. I'm not sure. For, for some reason- Jagger Wright I'm not. Dean Baker …it sticks in my head. Jagger Wright Mm-hmm. Dean Baker But, but definitely wrong. But anyhow, you know, the, the bottom line, at the end of the day, the government has to stand behind the banking system. You know, it's, you know, if, if you don't want, if you don't want financial crises. You know, that's, uh, you know, it do- not guarantee it won't happen. Uh, I'm sorry, that's a digression, but the point just being that there's, there's gotta be a quid pro quo. So, if you're insuring deposits, which I think you wanna do, then you have to police what the banks are doing. And we didn't do that. So, you got, you know, this brilliant idea that, "Oh, we're gonna deregulate." Okay, deregulate, take away the insurance, then everyone goes, "You're crazy. You can't take it away." Go, "Okay." If you're gonna have the insurance, you have to police it. So, you know, the problem was that, you know, and again, you could decide whether this is intrinsic to capitalism. They make more money if they can get the insurance without paying for it. That's basically what they wanted. You know, so it's not that you, you can't have insurance where it's properly policed, in principle, but when you have very powerful groups that, you know, don't ... You know, they're, they're, they're, they're gonna use their political power to-... we can, if not eliminate the policing, and then they make more money. So is that inherent? Well, you know, you have power imbalances. I mean, it appears in every segment of every area of business. I mean, it's, you know, the, the auto industry would like, you know, f- fewer pollution controls because they want to be able to sell cars cheaper and pollute the air and let that be someone else's problem. You know, I mean, it goes down the list, pick whatever industry you want. So, you know, I don't, I don't know if that's, you wanna say that's intrinsic to capitalism. Jagger Wright Mm-hmm. Yeah. Dean Baker I mean, they wanna make m- Um, it's, it's a question of power imbalances and, you know, how do you address that when you have... And obviously it becomes more extreme when you have the levels of inequality we have today, but, you know, the money does buy power. There's no two ways about that. Jagger Wright I've recently read this Princeton study about how different corporations have all this lobbying power, and there was a graph where it was like in Congress if they wanted something to pass, the corporations had 100% success rate and no matter what, like the average person had a 0% success rate, no matter what thing they wanted to pass. So- Dean Baker So. Jagger Wright …do you think that in this s- form and in this economy, have we entered a phase where crisis is almost inherent to these big corporations making money? Or do you think there's policies that we could put into play that doesn't allow these people to have so many, so much lobbying power or different policies we could play to add more regulation to these markets? Dean Baker There are definitely policies that could, you know, could, could affect this. I mean, you know, it, it, uh, a, a lot of it is, you know, campaign finance, um, you know, uh, uh, ah, i- with this court certainly the idea that you would regulate finance in a serious way becomes implausible if not impossible. Um, can you go the other way though? You know, which has been my interest at least given the realities. You know, can you have public financing? Which a number of states and cities do. Uh, Seattle has, uh, p- they have a democracy voucher everyone gets. I think it's 100 bucks. Doesn't matter, you know, some, some that they can- Jagger Wright Mm-hmm. Dean Baker …give to the candidates of their choice. It's only for local elections. New York is something similar. I think it's a super match where contributions of less than, you know, I don't know, $100, $200 are matched five to one. You know, something like that. And then the candidates who get them also have to agree to limit their outside contributions. Now you can still have third parties. I mean, that's a problem we still have tax that, you know, you can't limit their spending 'cause, you know, they're independent, they're separated, you know, at least in principle. Um, but in any case, that does a lot to help equalize it. So you could talk about things like that. And obviously, at least in principle, you could advance that, you know, state level, federal level, um, that would help. Um, the media is a huge factor. You know, I write a lot, uh, my blog's called Beat the Press, which used to be much more focused on the press than it is now. I've gotten lazy in my old age- Jagger Wright Mm-hmm. Dean Baker …because I used to, you know, read through everything first thing in the morning and usually have two or three pieces that I'd write up that day. Um, I don't do it, do that anymore, but in any case, um, I really think a big part of the story is the press and it's always been problematic, but it's become much more so as we get into this period of, you know, consolidation with, uh, you know, Paramount taking over CBS controlled by, you know, uh, Larry Elliott, a good friend of Trump and then you have Musk controlling, uh, uh, Twitter or X and, you know, uh, Zuckerberg with, uh, Facebook. You know, it's, it is a real problem. And there are two, I think there are things you could do support, you know, alternative media. I've, I've suggested having, uh, a media tax credit that, you know, everyone gets 100 bucks to support the news outlet. You know, again, sums arbitrary, but the point is you could, you could support a lot of, uh, media, a lot of f- Jagger Wright (laughs) Dean Baker …journalism with a relatively small contribution from, you know, from individuals. Um, so I think that would go a long way. Um, you know, yeah, antitrust against some of these would be great. Um, one of the things I've been frustrated with, uh, the Section 230 that, you know, Musk could use his algorithm to pass along anyone's libel, you know, so someone could, you know, say that, uh, you know, Nancy Pelosi, you know, is a prostitute this, you know, just make up any nonsense about someone and it could be, you know, you could, you could post on Twitter anonymously. You know, there's some guy I, I joked once I was saying, uh, what's his name? Catturd. He, he, he posted under the name Catturd. (laughs) Jagger Wright (laughs) Dean Baker So, so, so, so I was saying, you know, suppose Catturd says blah, blah, blah and, you know, and, and, you know millions of people 'cause he does have millions of people follow him, millions of people see it and I don't know who Catturd is, so that doesn't do me any good. (laughs) You know? I should be able to s- you know, my point being I should be able to sue Elon Musk because he's the one who- Jagger Wright Yeah. Dean Baker …wholesale it, you know, because Catturd, if you're just out on the street yelling, you know, who cares, you know? The point is- Jagger Wright (laughs) Dean Baker …you could reach millions of people because of Elon Musk and, you know, that is actually a rule for, you know, broadcast and for print, you know, they're liable. Uh, so some guy responds to me and he goes, "Oh, well, I know who Catturd is." (laughs) Jagger Wright (laughs) Dean Baker Okay, good. That's not the point. (laughs) Jagger Wright Yeah. (laughs) Dean Baker But anyhow, you know, we, if, if we had been more mindful and we still have to be mindful 'cause it, uh, you know, the problem's just gotten worse. It's not going away. We're just more disadvantaged in trying to deal with it. But if we'd been more mindful in trying to equalize the factors that, you know, allow for, you know, corporations to run wild, I think you can control it. You know, that's just saying in principle because how do you get from here to there? You know, that I don't know, but I, I think there was a lot of negligence on the part of, you know, do you want to say liberal left or just people who support Democratic, you know, democracy, you know, just a lot of negligence in not focusing, at least to my view, what were the real issues. Jagger Wright Well, thank you. Thank you so much. Um, this has been a great interview. My Zoom time is actually running out 'cause I know I'm through. Dean Baker (laughs) Okay. So I talk too much, so. Jagger Wright But... No, no, no, don't worry. It, it has been amazing, super insightful. I'm so glad I was able to do this. I have one more question though. I have about- Dean Baker Okay. Jagger Wright …nine minutes left. But-There are many students like me around New York, around the country who wanna go into econ or wanna pursue something finance-related, something around that area. Is there any advice you would give s- people like me, senior year, going to college next year, to pursue this kind of path on the right path? Or should we kind of just learn, learn ourselves? Dean Baker You know, when I was starting grad school, there was a clear break between, say, sort of more left-wing economics and mainstream, and I would have told people to stay away from the mainstream schools, uh, you know, and try to go to one of the more progressive left-wing schools. Jagger Wright Yeah. Dean Baker Um, I think that break's largely broken down. Um, you have places like y- uh, Berkeley, that has some very good progressive economists who have solid standing. I mean, uh, the, uh, Zucman. What's his name? Gabriel Zucman, who got the, the, uh, John Bates Clark Award. It's about the, it's in some ways more prestigious than the Nobel Prize, 'cause it's only given every two years and to just one person. So he's at Berkeley, as is, uh, Ed- Edward, uh, what's his name? Emmanuel Saez. You know, same thing, also very well-respected economist. Um, you have Brad DeLong, who's kind of a nutball but very open-minded. Jagger Wright (laughs) Dean Baker Um, uh, Jesse Rothstein, an old friend who's, does a lot of very good labor economics. Um, uh, what's his name? Card, uh, David Card, again. So, so that place stands out, but that's true of some of the other places as well. It's just they've, it's become a much more open discipline than it was, say, 40 years ago. When I started graduate school, that was the heyday of, uh, rational, rational expectations, which, you know, if you (laughs) haven't come across, you're probably lucky. But it was, it, the idea was the government can never really do anything to boost the economy, 'cause, you know, if it were to increase spending, it just crowded out, crowds out investment. If it tries to, uh, lower interest rates, it just causes inflation. And, and that was taken very seriously. You know, a lot of the leading economists really took it seriously, and even people who didn't, uh, go for it hook, line and sinker thought, "Oh, yeah, we really have to contend with that." So they had to make... I, I won't go into all the details. Uh, but anyhow, long and short, I just think the profession's got much more open. So what I'd say is look to places where people are doing work that's interesting. You could find those now. And, you know, places... You know, Berkeley's got very good standing. I mean, I'm focused on Berkeley 'cause I know those people, but, you know, there's, there's some good people at- Jagger Wright Mm-hmm. Dean Baker …the other top schools too. So Michigan has some. I mean, it's not as high-ranked as Berkeley, but, you know, it's got some, and, uh, MIT even. You know, David Autor, who used to be, you know... I, I, I consider him sort of an ogre 'cause he's very much a centrist- Jagger Wright (laughs) Dean Baker …and critical of people on the left, but he ended up... He, he wrote very important work with China Shock, which, you know, you go back to 2000 when we opened up trade to China, people like me were totally derided. Like, "Oh, you're protectionist Neanderthals." You know, we were saying, "No, this is really gonna devastate manufacturing." Well, guess what? It did. You know, and David Autor was arguably the most prominent labor economist in the country. Wrote the best work on that, you know, so, um, you know, after the fact, you know. (laughs) Jagger Wright Yeah, yeah. Dean Baker But, uh... But, uh, so anyhow, it's just become much, much more open as a discipline than it was. So I'd just say look to... Read people's... You know, you don't have to know all the technical stuff. Just read, you know, 'cause what you wanna know is are they looking at, uh, at interesting issues in interesting ways. You'll learn the technical stuff when you actually go to grad school, but- Jagger Wright Mm-hmm. Dean Baker …that's, that's a question you wanna ask. Jagger Wright Well, I applied to Berkeley, so fingers crossed. Dean Baker Good, good. Jagger Wright You know, from- Dean Baker Well, good luck, good luck. Jagger Wright From your- Dean Baker Look, look those people up. Uh, you know- Jagger Wright Yes. Dean Baker …a lot of very good people are there. Jagger Wright I will. Thank you- Dean Baker Okay. Jagger Wright …so much. Thank you. It's, it's been a pleasure. Um, thank you so much for responding to my email. Most don't. And it has been very insightful. I feel like, you know, really in on 2008 right now, so thank you. Dean Baker (laughs) Okay, good luck with it. Jagger Wright Thank you. Dean Baker All right. Enjoy talking. Jagger Wright That's gonna wrap it up for this episode. (instrumental music plays) Hopefully you got something out of it, maybe learned something new. Either way, thanks for being here. Thanks for being here with me, and I'll see you next time.