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The intervention by the regulators to save the U.S. economy will lead to further bankruptcies of banks and insurance companies
Bernanke and Paulson acted unwisely. They have together put US economy into shambles. The US economy has dragged the world economies into deep recession.
Robert J. Aumann, the Israeli economist who won the 2005 Nobel Prize in economics, said the steps taken by Federal Reserve Chairman Ben S. Bernanke and U.S. Treasury Secretary Henry Paulson to save financial markets ``weren''t smart.''''
The crisis in the financial markets was caused by the incentives provided to managers of banks and other financial institutions that caused them to act to their own benefit and not the banks'', he said. Bonuses were given on the basis of loan sales, without considering who the borrowers were, he said.
More than 100 of the world's biggest banks and securities firms have posted about $685.4 billion in asset writedowns and credit losses because of the financial turmoil. A month ago, Congress approved a $700 billion rescue package that gave the Treasury wide authority to buy and guarantee assets to prevent a U.S. financial collapse.
Aumann, who won the Nobel Prize for his work on game theory, said there is ``no financial crisis'''' in Israel. The Israeli government's decision not to intervene in the financial markets was correct, he said.
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