Woodrow Wilson News & Publications

"Although it was incredibly galling for the government to bail out these financial institutions, and while the bailouts could have been done significantly better than they were, I think they were socially beneficial. In retrospect, their cost was low relative to the benefits that were received.

"It's incredibly infuriating. You have a system in which basically, banks are the primary mediators of investment, so banks collect capital deposits, essentially, and then hand them out in the form of loans or whatever. Then it's really hard to put things back together if you have massive bank failures, and that's just the harsh reality.

"One of the other things I would say is challenging right now is that, while the Federal Reserve has taken enormous amounts of action to help keep the economy going— especially in the context of history, the Fed's actions over the bailout's four years have really been unprecedented—there's more that could be done, and I would argue, that should be done.

"We would be better off if we had been more aggressive in expanding the money supply. One of the things people hate, pretty much across the board, is inflation. But in this case, given the unemployment rate, a little more inflation would be a good thing. It would have gotten people to put money to work instead of keeping it in the bank or essentially having banks just sit on their reserves.

"That seems really counterintuitive—inflation just seems like a bad idea—but I think it would have been beneficial to pretty much everybody. Even though it seems strange, I actually think the economy as a whole would be moving more robustly if the Fed had been more aggressive in that regard."

"It's hard to know what the long-term consequences are, but I think the job crisis is one of the more important stories of the last few years.

"American companies have actually been doing exceptionally well. American workers who have jobs have been doing, not exceptionally well, but okay. The truth is that, if you have a job, the last few years have actually not been necessarily all that hard.

"The thing that's been really distinctive about the years after 2008 and early 2009—after the period when the recession hit incredibly hard in the wake of the financial crisis—is that the real driver of the unemployment rate has not been that businesses have been slashing jobs. The real driver has been that businesses haven't been hiring. That actually created a profound dichotomy in the labor markets.

"So if you have a job, things have been okay. It's not like we've just been riding at a fast clip; we've kept pace and actually have been slightly ahead of inflation. The real problem is that if you don't have a job it's been really hard to get a job, and I think that that's the real issue. We have a lot of people who have been unemployed for a very long period of time, and the longer you stay unemployed, the harder it is to get a job. That, I think, is actually the biggest challenge that policy makers face going forward."