The remarks below are excerpted from a recent interview by Morningstar’s Bill Bergman with Walker Todd, Martin Mayer, and Edward Kane on the current financial situation. In addition to being an AIER Research Fellow, Walker Todd directs AIER’s Summer Fellowship Program. Martin Mayer and Edward Kane are also familiar faces at AIER. They have both participated in AIER conferences, given lectures concerning their research, and will present seminars in the 2009 Summer Fellowship Program.

“The notion that the nation’s currency is backed by a bunch of junk bonds and CDOs and such things on the books of the Federal Reserve District Banks is pretty scary.”      

“Officials panicked in September 2008, and the public lost confidence in their ability to manage. It is striking how in these different agencies, a small inner circle of people have closed themselves off to ideas from even the rest of their staff. I understand that in a lot of agencies everybody goes home on time, but this inner circle has been working itself to death. Along with panic, I think there is exhaustion and some loss of judgment, because they’ve been under pressure for so long.”

– Edward Kane, professor of finance at Boston College and past president of the American Finance Association

“I think all the chickens will begin flocking home to roost in about the middle of the third quarter. Whenever the further downturn comes, if I’m right, what will these players do for an encore? What happens if and when the next downturn comes?”

– Walker Todd, AIER Research Fellow and former attorney and consultant at the Federal Reserve Banks of New York and Cleveland

Read the entire interview, including analysis of the current financial situation and the Fed's response to it, in the Morningstar article “How the Fed Contributes to Crises.”