MADELEINE BRAND, host:
Secretary Paulson's plans for sweeping measures to cope with the crisis on Wall Street could be the biggest intervention in the stock market since the 1930s. And we've heard a lot of comparisons this week to the Great Depression of the 1930s, that this is the worst financial crisis since then.
Unidentified Man #1: It's the worst credit crisis we've had in the United States since the Great Depression.
Unidentified Man #2: The worst recession since the 1930s.
Unidentified Woman: The mother of all crises.
Unidentified Man #3: Without doubt, the worst...
Unidentified Man #4: The worst...
Unidentified Man #5: This is the worst...
Unidentified Man #6: That we've had...
Unidentified Man #7: Since the Great Depression.
BRAND: Stock market historian John Steele Gordon is here now. And Mr. Gordon, is that an accurate thing to say, that this is the worst financial crisis since the Great Depression?
Mr. JOHN STEELE GORDON (Author, "An Empire of Wealth: The Epic History of American Economic Power"): Well, it depends on how it plays out. We're not out of the woods by any means yet, but certainly things are looking better at this end of the week than they did at the other end of the week. And I think, at the moment, it's a little overstating it to say that this is the worst crisis since 1930s. For one thing, we're talking about strictly a financial crisis, not an economic crisis. The American economy is basically sound. Unemployment is still quite low by historical standards. Inflation is under control. The farming sector is flourishing. All of that was completely different in the 1930s, and we were in a desperate crisis.
BRAND: Right. There was the Dust Bowl that was causing a big problem in the agricultural sector then. Unemployment was at 25 to 30 percent. Half of the nation's banks had failed.
Mr. GORDON: Yes, indeed. I mean, banks were failing at the rate of 1,000 a month by early 1933. And actually, when Franklin Roosevelt was inaugurated in March of 1933, banks were entirely closed in 38 states and were operating under limited basis in the other ten.
BRAND: OK. So, maybe it isn't comparable yet to the Great Depression, but it is pretty bad. And is it the worst crisis we've seen since then, since the Great Depression?
Mr. GORDON: As a financial crisis, yes. I mean, Wall Street right now is in a thorough-going mess, and they're taking very bold steps to reverse that. I mean, yesterday, the major central banks of the world pumped 180 billion dollars into the banking system, and that, even by central-banks' standards, that was a lot of money. And once we can get the system - the system at the moment is frozen up, and once we can get it moving again, then I think everything in the long run will be fine. This - what is going to happen, what makes it comparable to the 1930s, I think, is we're going to see a fundamental change in economic regulation.
BRAND: OK, talk a little bit more about that, because the news out today is that the government is looking towards broader regulation. And what do you think is going to be put into play? And what do you think is necessary right now?
Mr. GORDON: We need to reform the system so that it has - you know, that everybody is working together, rather than sometimes across purposes. And also, you know, bureaucracy's always tried to protect turf, and so, they end up fighting each other, rather than regulating the system. This is - you know, ordinarily this is very hard to do politically, but the nice thing about a crisis like this is it gives us the opportunity to do this. And so, I hope that there will be - you know, they will sit down in a room somewhere, and come up with a top-to-bottom reform of the regulatory system, and make it much more rational than it is right now.
BRAND: John Steele Gordon is the author of the book "The Great Game: The Emergence of Wall Street as a World Power." Thank you very much.
Mr. GORDON: Thank you.
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