William Cohen warns next time, it might even be worse.
William Cohen—a former senior-level mergers and acquisitions banker on Wall Street who is now a special correspondent for Vanity Fair—on Sunday spoke about the ten-year anniversary of the 2008 financial crisis, warning the practices that prompted the economic collapse have not substantially changed in the past decade.
In an interview with CNN’s Ana Cabrera, Cohen warned the United States has not made the necessary changes to prevent another devastating recession.
“I wish I could say that we had, but we haven’t,” Cohen said. “The main driver of bad behavior on Wall Street is the compensation system, what people get rewarded to do. People are pretty simple—they do what they are rewarded to do. Wall Street is still rewarded to take big risks with other people’s money. They are not rewarded to take prudent risks. We’re going to end up in the same situation again. I’m afraid it’s going to happen much sooner than anyone would like and it will be just as bad as the last one, if not worse.”
“We need to change what bankers are rewarded to do so they are not rewarded to to swing for the fences as if it were somebody else’s money, because it is, as opposed to their own money where they will be prudent about their risk taking,” Cohen explained. “That’s the single biggest thing we should change if we want to change this kind of an outcome from happening again.”
Cohen also described the “very short-term psychological damage” stemming from the 2008 financial crisis.
“Institutions that we once had a lot of faith in the banks, Wall Street, were completely shattered,” Cohen explained. “A lot of faith was lost in Congress because they voted down the TARP (Troubled Asset Relief Program) the first time and only passed it the second time. I mean, honestly, if you look at the economy now and the spirits that are raging now, I think it was sort of a short-term frightening and scary effect, but now ten years later, I bet most people don’t even remember it. Most people who are young on Wall Street couldn’t even tell you what had happened.”
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