Almost continuously since 1800 some part of the world has been in a banking crisis and some country has failed to repay its debt — in other words, has been in default.

Given their frequency, why do crises always come as a surprise? Reinhart and Rogoff, economics professors at the University of Maryland and Harvard University, respectively, say investors and governments “delude themselves” into thinking they are smarter than their forebears. This thinking guarantees new “bouts of euphoria that usually end in tears”

This begs the critical question: Why is the government allowing Goldman
Sachs to function this way? It now has access to the Fed discount
window and lender of last resort facilities, it gets funding from the
Fed at close to zero percent, it is no longer subject to market runs on
its stock because the FDIC backs up its deposits, and supposedly it is
now visited routinely by Fed examiners who can see exactly what is
going on. Yet there is not a peep of objection from the Fed, the
Treasury, the White House, or even Congress about a soi-disant
investment bank now converted into a commercial bank, which openly
disdains any suggestion it should act like a commercial bank, which is
struggling in its traditional investment banking businesses, and which
is still allowed to make money hand over fist through outright
speculation and what we might call “trading with advantages.”

As Charlie Munger might say, they were like the mouse who cries, “Let
me out of the trap, I’ve decided I don’t want the cheese.”

“Generally, we did not do enough.” (Referring to the failure to
address growing concerns over excessive risk-taking in the period
leading up to the financial crisis.) [Editor's note: understatement of the year?]

Stephen Roach, Chairman, Morgan Stanley Asia:

Those who are looking for a “V”-shaped recovery are in for “a rude awakening.”

“The imbalances going into the crisis were large to begin with. Now, they are bigger than ever.”

George Soros, Chairman, Soros Fund Management:

“Bankers have too much power.” (Referring to the hold that Wall Street has over Washington.)

The “globalization of financial markets is built on false premises: namely, that markets can be left to their own devices.”

Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation:

“Insured deposits are being used in ways that I don’t like to see.”

Wilbur L. Ross Jr., Chairman and Chief Executive Officer, WL Ross & Co.:

People were focused on “risk-ignoring rates of return.” (Describing
one of the things that went helped bring about the financial crisis.)

If regulators had taken the time to visit a Countrywide Lending
office, they would have seen something akin to “a Wall Street boiler
room,” rather than a bank branch. (Referring to regulator’s
unwillingness to go out into the field and see what was really going on
during the housing boom.)

“Government is its own systemic risk in the mortgage market.”

Lawrence H. Summers, Director of the National Economic Council, The White House:

The root of most financial errors is “when you try to do today what you wished you had done yesterday.”

“I can assure you that on Main Street, it is a very different
conversation.” (Referring to the contrast between the optimism on Wall
Street and the more pessimistic mood of those struggling to get by in
other parts of the country.)

“It is not the administrations’s view to bribe those who have been
part of the problems we have experienced to do what is in the national
interest.” (Referring to the suggestion that banks and other financial
institutions need financial incentives to support proposed regulatory
changes.)

Jeffrey D. Sachs, Director of The Earth Institute, Quetelet
Professor of Sustainable Development, and Professor of Health Policy
and Management, Columbia University:

“It was grotesque.” (Referring to fact that, despite its
extraordinary size, the $62 trillion credit default swap market was
essentially unregulated.)

“This was a crisis made in the U.S.” (Referring to the suggestion
that China’s export policies played a key role in creating the credit
bubble.)

Niall Ferguson, Laurence A. Tisch Professor of History, Harvard
University, William Ziegler Professor of Business Administration,
Harvard Business School:

“We are living though a gradual shift away from a dollar-centric system.”

“Is China the Germany of our time?” (Referring to the combination of
economic dynamism and growing nationalism that stoked the aggressive
ambitions of Nazi Germany.)

“The problem of being a declining empire doesn’t have a solution.”
(Referring to the suggestion that a great many, if not all, of
America’s problems are fixable.)

Robert J. Shiller, Arthur M. Okun Professor of Economics, Yale University:

“Look up ‘bubble’ in an economic textbook and it’s not there.”
(Referring to the shortcomings of the traditional economic curriculum.).

People “are living in a ‘pretend-and-extend’ environment, waiting 
for the economy to recover.” (Referring to the precarious state of the
commercial real estate market and the wave of resets coming due between
2011 and 2013.)

Elizabeth Warren, Chair, TARP Congressional Oversight Panel:

“The reason banks lost confidence in each other is because they
looked at their own books.” (Referring to the loss of confidence that
roiled markets during the darkest days of the crisis.)