Ryssdal: You have taken centuries of human economic interaction and boiled it down to 250, 300 pages but let me ask you to take it a step further. And give me the 30-second version of what the layman, the person who functions in a capitalist economy really needs to know about capitalism and how it works?
MORGENSON: Capitalism is a system that can benefit the greatest array of people, but it is a system that requires an ethical backdrop, a moral compass. And so I think what we’re seeing now is that that ethical drive really took a backseat during the credit boom and the mortgage mania that we witnessed during the early part of the century. And so what people have to understand is why that happened. And also capitalism has these kinds of booms and bust cycles. And while this one was tremendously perilous, I do believe that if you look back in time you will see and conclude that capitalism can survive this if certain changes are made.
Ryssdal: Why do you think that happened, that ethics became so much of an issue?
MORGENSON: I think we had a two-pronged failure. First was the failure of people in positions of power to remember that they have a social contract. As you rise in an organization, you have a greater responsibility to do the right thing, to rein in practices, identify practices that are imperiling others. That almost got lost. But the other prong of this failure was the failure of the regulators. These entities, institutions from the highest level down to the very lowest really failed dismally at their jobs. And so you had a combination of failures here that really contributed to this disaster.
I’d have to disagree with her statement about the failure of the regulators in this mess. What was going on wasn’t some wild-west financial anarchy, it was policy. And you don’t restrain with one hand what you are trying to do with the other.