In this week’s episode of The Burn Bag Podcast, co-hosts A’ndre and Ryan speak to Michael Barr, Dean of the Ford School of Public Policy at the University of Michigan and former Assistant Secretary of the Treasury for Financial Institutions. A’ndre, Ryan and Dean Barr discuss the challenges of rebuilding the global economy post-COVID-19, attracting foreign direct investment to the United States, the Robinhood debacle and securities regulation, repeating mistakes from the 2007/08 financial crisis, the risks of cryptocurrency, and economic sanctions as part of U.S. foreign policy.
On whether the United States should create an alternative to the Belt and Road Initiative: “I think that the Asian Infrastructure Bank and the Belt and Road Initiative are emblematic of China’s desire to exert more economic influence beyond its borders, which one can understand given their stage of development, their growing strength economically. As I was saying before, I think the right response to that is not to be cowering, afraid of it, but to demonstrate the superiority of the US way of engaging, to demonstrate the reason why Western institutions have rules, for example, to prevent corruption, rules that are designed to enhance democracy. These are critical parts of our values, and I think we need to be willing to stand up for them and to continue to pursue them.”
On attracting foreign direct investment to the United States: “I think the United States is still a really strong and important destination for foreign direct investment. And if we want to continue having it be strong, we need to invest in our own economy. We need to invest in our infrastructure, and our roads and our bridges and our rails. We need to invest in our cities. We need to invest in good, green jobs that will grow our economy. Focus on, for example, on electric cars and investments domestically in battery technology and in battery building here in the United States. And I think if we have a focus on strengthening the core infrastructure of our country, if we invest in our people, if we invest in our school systems, if we invest in workforce development — if we take seriously our obligations to our own citizens in these ways, we’re going to be a country that continues to thrive and continues to attract others to want to invest in our country, to want to come here, to work here, to want to do business with us.”
On the Robinhood debacle and securities regulation: “I do think that it’s a wake up call for securities markets. I’ve been long concerned about issues of manipulation in securities markets and in other financial markets, particularly as those markets become increasingly dominated by high frequency trading, using algorithms. And these are increasingly also using machine learning techniques that make it very hard to detect when manipulation has occurred and make it hard to enforce the securities laws. So how do you show that a blackbox machine, an algorithm, had the intent to manipulate the market (…) the Robinhood events are kind of a canary in a coal mine for much broader concerns I have about the fairness and the safety of securities markets.”
On repeating mistakes from the 2007/08 financial crisis: “Well, I’ve been very concerned over the last four years that financial regulators are taking their eye off the ball on the safety and soundness of the financial system. There have been efforts to reduce capital requirements, reduce liquidity requirements. There has been a weakening of what’s called stress testing of the largest financial institutions. Our consumer protections have been cut back dramatically, investor protections have gone underenforced. And so if you look really across the board at the financial regulatory system, we’re in real danger that we’re going to forget the lessons of the financial crisis and recreate really problematic conditions. So I think it’s really important for the financial regulatory agencies in the coming years to stay on the path of financial reform. (…) I want to say that the financial system is a lot safer than it was in 2008, and it’s a lot fairer than it was in 2008. But that’s not good enough. We need to keep pushing on that path of reform.”
On using the strength of the U.S. economy in foreign policy decision making: “Well, I think that we need to use all the tools available to us in a supple and nuanced way, whether that’s our tools of sanctions, our tools of military prowess, our alliances and our relationships (…) I think it’s a mistake to say that if we just sanction somebody, we’re going to get what we want. That’s not how it works. Sanctions are one aspect of an overall strategy to convey American power on issues that matter to the United States. So, let’s be careful to use them as part of a broader package, not necessarily a one off unilateral approach, thinking that imposing sanctions or tariffs are going to answer all of the issues we might face. Not shying away, on the other hand, from using them if they could be part of a broader strategy to advance American interests.”