Δαφνη Ευτυχια Αρθουρος

"How much of what happened with Bear Sterns, Lehman, AIG, all the stuff we're reading about and experiencing as a country every day -- on the part of Wall Street, how much of this had to do with mistakes, honest or otherwise, but mistakes versus greed -- just outright greed?"

"I don't think they were mistakes, honestly. I think the compensation system on Wall Street provided huge rewards for firms to create financial innovation -- take a financial innovation like securitizing mortgages and selling them all over the world -- this is the creation of these so-called mortgage-backed securities.

"That was a financial innovation at one point, started by Lou Ranieri at Salomon Brothers. That was a very interesting financial innovation, and a very effective one. But Wall Street has no carburetor, it has no ability to stop when it discovers a financial innovation. It pushes it to the limit because that's what the incentives are on Wall Street.

"You get rewarded for doing more, more, more and more. More revenue equals bigger bonus. So they discovered this great thing called mortgage-backed securities and they sold it hard and strong for as long as they possibly could, until the bubble inflated and then burst and exploded all over the place.

"Same thing with Internet IPOs, and it has to do with the way Wall Street is compensated. So a little less financial innovation, or if you're going to have financial innovation, then be a lot more careful about what you're rewarding people to do.

"And I think to some extent, the market on Wall Street is taking care of that, but again, the short-term memory is a big problem, and I think we need to watch it very carefully."

[Emphasis added by me -- DGA]