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00:00LUIGI: IT MAKES ME MORE LIVELY. TOM: SENATOR WARREN IS MAKING IT MORE LIVELY. NOT ONLY DOES SHE WANT TO GO BACK AFTER WALL STREET, BUT WANTS TO GO BACK INTO THE PAST. IS THAT FAIR PLAY? ANAT: WELL, I THINK WE SHOULD HAVE FAIR PLAY IN THE ECONOMY. I AM NOT SURE ABOUT GOING BACK TO ADDRESS THE MISTAKES OF THE PAST, BUT THERE ARE A LOT OF CHANGES I HAVE BEEN ADVOCATING FOR A DECADE THAT WOULD AFFECT THE POWER, LET ' S SAY. TOM: WE TALKED ABOUT THE DAWN OF THE GILDED AGE. HOW GILDED ARE RE-, AND WHAT IS THE VECTOR OF THE GILDED AGE INTO 2020? ANAT: WE ARE IN A SORT OF GILDED AGE AND WE NEED TO CORRECT SOME OF THE DISTORTIONS IN THE ECONOMY AND THE WAY IT WORKS. I THINK WE HAVE A LOT TO DO AND THIS CONVERSATION IS VERY GOOD TO HAVE, EVEN THOUGH IT IS CONTROVERSIAL. FRANCINE: IS THERE A COUNTRY THAT HAS DEALT BETTER THAN OTHERS WITH THESE DISTORTIONS? ANAT: PEOPLE .2 COUNTRIES -- POINT TO COUNTRIES IN EUROPE, SCANDINAVIAN COUNTRIES LIKE DENMARK. THEY RIDE THEIR BIKES, WE JUST READ. THAT IS GOOD. GENERALLY IN EUROPE, THERE IS A LITTLE BIT OF A MORE HUMANE SAFETY NET AND SOME MORE STANDARDS FOR SAFETY ISSUES THAT CAN PLAGUE OUR FREE MARKETS AND CAUSE A LOT OF HARM THAT WE HAVE TO FIX AFTER THE FACT. FRANCINE: WHERE DO YOU SEE THIS CONVERSATION GOING? WE STARTED THREE OR FOUR YEARS AGO TALKING ABOUT ANTI-GLOBALIZATION AND THE ROLE OF SOCIAL MEDIA. WHAT CONVERSATIONS WHAT WE HAVE IN TWO YEARS FROM NOW? LUIGI: THIS IS A LONG TREND. WHEN I WROTE MY BOOK IN 2012, I PREDICTED POPULISM WAS INEVITABLE AND THIS IS THE FORM IT WOULD TAKE. EVERYBODY KIND OF MADE FUN OF ME, WHAT ARE YOU TALKING ABOUT? SINCE THEN, THE WORLD HAS CHANGED. I THINK DIFFERENT FORMS OF POPULISM ARE PREVAILING, BUT I THINK THAT ELIZABETH WARREN, SENATOR WARREN IS SAYING SOMETHING VERY IMPORTANT. THE VAST MAJORITY OF AMERICANS HAVE NOT BENEFITED FROM THE GROWTH IN THE LAST 40 YEARS, AND THIS IS NOT SUSTAINABLE. I THINK THAT IS THE CONVERSATION, WHAT DO WE DO ABOUT IT? PEOPLE MIGHT DISAGREE, BUT THIS IS A FACT WE CANNOT IGNORE. TOM: WHAT IS DIFFERENT WHEN YOU PIONEERED WITH THIS YOUR WORK IN THE BEGINNING OF THE FINANCIAL CRISIS, YOUR HARSHEST CRITICS, IS THAT WE HAD A DIALOGUE AND A DISCUSSION. IT TAKES A VILLAGE TO MAINTAIN A DANGEROUS FINANCIAL SYSTEM. HOW IS WALL STREET ADAPTING TO THE FRACTURE IN AMERICAN SOCIETY? ANAT: THEY GO ON TO ATTACK. THAT IS NOT USEFUL CONVERSATION. TOM: JAMIE DIMON WOULD SAY HE IS DOING PHILANTHROPY AND PROVIDING DOLLARS TO THE COMMUNITY. ANAT: OH, PLEASE. TOM: JUST GETTING WARMED UP. WHAT DO YOU NEED TO SEE OUT OF THE NEW WALL STREET, WHETHER IT IS A DEMOCRAT OR REPUBLICAN IN 2020, WHAT IS THE BEST PATH FOR WALL STREET? ANAT: STOP THE NONSENSE AND TRY TO HAVE A SERIOUS CONVERSATION ABOUT WHAT IS GOING ON, INSTEAD OF THIS LET ME DO SOME PHILANTHROPY AS A SOLUTION TO THE PROBLEM. WE NEED TO DISCUSS SOME OF THE WAY THE SYSTEM WORKS. WE NEED TO MAKE IT MORE TRANSPARENT AND SEE WHERE THE RISK IS TAKEN AND WHO BENEFITS. TOM: I LOOKED AT THE GROVE YESTERDAY WHERE THEY HAD THE NATO MEETINGS, AND IT WAS BROUGHT OVER FROM PRIVATE TO COMMERCIAL OWNERSHIP BECAUSE OF THE CHANGE IN TAX LAWS IN THE UNITED KINGDOM A MILLION YEARS AGO. LET ' S TALK ABOUT PRIVATE EQUITY TAX FAVOR ON WALL STREET. EVEN SOME OF THE MOST CONSERVATIVE WALL STREET PEOPLE SAY IT IS OBVIOUSLY UNFAIR. DO WE NEED TO AMEND THE WALL STREET TAX SYSTEM THAT FAVORS PRIVATE EQUITY? LUIGI: THE TREATMENT OF THE CARRY AND PRIVATE EQUITY, ABSOLUTELY. THIS IS AN OLD BLUE PAUL BY BILL CLINTON -- OLD LOOPHOLE BY BILL CLINTON THAT SHOULD BE ELIMINATED. ANAT: I AGREE. TOM: SENATOR WARREN IS ON THE FRINGES OF THIS. SHE IS GOING DOWN IN THE POLLS. I HOPE SHE DOES WELL. WHAT DO YOU NEED TO SEE FROM THE ANAT ADMATI CANDIDATE THAT WILL CHANGE THE BEHAVIOR OF GLOBAL WALL STREET? ANAT: THERE ARE PIECES FROM SHAREEF BROWN, WHO IS NOT RUNNING, AND SOME FROM ELIZABETH WARREN. THERE SHOULD BE LESS LEVERAGE IN THIS SYSTEM AND SECONDLY, WE NEED TO WORRY ABOUT THE WAY COMPENSATION STRUCTURES WORK AND THE WAY IT WORKS IN THIS SYSTEM. WE NEED MUCH BETTER ACCOUNTING STANDARDS. IT IS A SYSTEM THAT HAS INCENTIVES FOR RECKLESSNESS BUILT INTO IT THAT WE NEED TO UNPACK THE ROOT CAUSE OF THEM. I HAVE SPECIFIC STEPS THAT WILL TAKE MORE DETAIL TO DO, BUT THERE IS A COMBINATION OF MEASURES TO ADDRESS DIRECTLY WHAT THE FLAWED INCENTIVES ARE THAT DO HARM. WHAT YOU DO WITH THINGS LIKE SPEED LIMITS. FRANCINE: CAN YOU TALK ABOUT THE PARALLELS OF WHAT WE ARE SEEING IN THE U.S. WITH EUROPE? IT COULD BE THE U.K. WITH BREXIT OR GERMANY AND FRANCE. LUIGI: THE CRISIS THAT CAPITALISM IS GOING THROUGH IS ALL OVER THE WORLD, AT LEAST ALL OVER THE WESTERN WORLD. THERE ARE TECHNOLOGICAL REASONS WHY THERE IS A PUSH TO LOW INCOME INEQUALITY. THERE IS A SERIES OF PROTESTS THAT GO FROM FRANCE TO ENGLAND, AND THERE HAS BEEN A LACK OF INTERPRETATION OF THAT PROTEST IN A WAY THAT IS POSITIVE RATHER THAN DISTRACTING. WE DON ' T SEE A CENTERLEFT ABLE TO UNDERSTAND AND DRAW THIS ISSUE TO THE TABLE IN A WAY THAT IMPROVES CAPITALISTS. I THINK THIS IS WHERE THE SYSTEM SO FAR HAS FAILED, AND I HOPE WE WILL HAVE A CHANGE IN THIS DIRECTION, ABLE TO INTERPRET THE DISCONTENT IN A WAY THAT IS

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Global Economic Distortions: Fixing a Flawed System

Stanford Finance Professor Anat Admati and University of Chicago Booth School Finance Professor Luigi Zingales discuss distortions in the global economy. They speak on "Bloomberg Surveillance." (Source: Bloomberg)

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