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New Year - new hope for US growth -

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CHRIS UHLMANN, PRESENTER: With the countdown on to usher in the new year the American economy is
ending 2009 with just the slightest glimmer of recovery.

The July to September quarter saw growth of just over two per cent and the predictions are for even
stronger growth in the final quarter of the year and that is enough for the President to start
expressing cautious confidence about the future.

But there are also signs of complacency, banks are paying big bonus again and some analysts are
starting to worry that the real lessons of the 2008 crash have not filtered through to the place
where it began.

North American Correspondent Michael Brissenden reports.

(Sound of bell ringing)

TODD HARRISON, FORMER STOCKBROKER: If last year proved anything, it's that it's not a financial
crisis, it's not an economic crisis, this is a social crisis.

Everybody is linked to their financial standing.

UNEMPLOYED WOMAN: I put in for probably, oh, probably 10 jobs, eight or 10 jobs a week. I get
interviewed for about four a week, and I'm still unemployed.

UNEMPLOYED WOMAN 2: There's no jobs out there. There's nothing. We were promised so much and we
didn't get anything.

MICHAEL BRISSENDEN, REPORTER: It may seem like health care and Afghanistan have soaked up most of
the news space in the US in the last few months. There's another story that dominated the politics
of 2009 - the economy.

After four quarters of decline tentative growth has returned in the last half of the year. Home
sales are up and while unemployment has topped 10 percent the rate of job losses has begun to slow.
But no one feels confident enough to call the crisis over, and there have been some hard lessons
for everyone along the way.

THOMAS COOLEY, ECONOMICS, NEW YORK UNIVERSITY: One thing that we have learned for sure is that our
financial system is a lot more fragile and has the potential to be unstable in ways that we hadn't
understood before.

MICHAEL BRISSENDEN: The question that is now being asked is has that lesson been learnt where it
all began. The concern that it hasn't stretches from here all the way to Pennsylvania avenue in
Washington.

After more than a year of crisis and uncertainty, there are positive signs that the any is starting
to pick up. but it's hard to find anyone that thinks the system itself is out of danger. According
to the President Wall Street still doesn't get it. It's an easy political shot. But there's plenty
of analysts who think he's right.

From his office at the top of New York University's Stern school of business Thomas Cooley can't
quite see Wall Street, but he is one of those who has grown increasingly concerned about the return
to business as usual by big investment firms, some of those that have paid back the taxpayer
bailout money are now preparing to once again dole out big multi-million dollar bonuses.

THOMAS COOLEY: If we say we are going to come in and bail you out if you engage in risky
activities, then you are encouraged to take on more risk and with more risk comes higher rewards,
higher salaries, better shareholder returns as long as the system doesn't collapse, and then if you
get too far out over the edge, the taxpayers will come and rescue again.

So they like that system. Very, very well. It's like being subsidised to build your house out in
the bush where you might get burned out by a bushfire, but if somebody else is paying for the
insurance, why not.

MICHAEL BRISSENDEN: Why not? Because the President says change is coming.

BARACK OBAMA, US PRESIDENT: I did not run for office to be helping out a bunch of, you know, fat
cat bankers on Wall Street.

MICHAEL BRISSENDEN: With the healthcare bill now out of the way the Obama Administration is about
to move through the list of stalled Legislative business. The banks have been lobbying hard against
it, but a financial regulation bill is expected to come to a final vote in the next few months.

BARACK OBAMA: Why is it that people are mad at the banks? Let's see. You guys are drawing down $10,
$20 million bonuses after America went through the worst economic year it's gone through in
decades. And you guys caused the problem and we've got 10 percent unemployment, why do you think
people might be a little frustrated.

MICHAEL BRISSENDEN: The Bill is being described as the most sweeping rewrite of financial
legislation since the Great Depression, among other things it will allow the Government to dissolve
huge globally interconnected banks, regulate the derivatives trade and give shareholders a greater
say on executive pay. But not everyone believes Wall Street should shoulder all the blame.

TODD HARRISON: When you paint an industry with the blame brush you have to be careful.

MICHAEL BRISSENDEN: Todd Harrison was a Wall Street trader for 20 years, these days he runs a
financial media company and says the culpability for last year's crash extends all the way to the
policymakers who were explicit. The systemic problem of too much accumulated debt goes back to the
'.com' crisis in 2000.

If anything he says, the markets need to be freed up to do what they do best, and weed out the bad
debt.

TODD HARRISON: It's very much Darwinism in its purist form, and it's gonna be punish those who
transgressed. Unfortunately it has to be that. You know, once you start opening the can of worms of
introducing these bailouts, and other bailouts and where do you stop?

I mean, therein lies the moral hazard. There's a big difference between you know, being a policy
maker and playing the role of God.

MICHAEL BRISSENDEN: Analysts warn that there is still a big credit risk in the market. The mountain
of debt associated with the leveraged buyout activity that took place over the past few years has
yet to be refinanced.

We haven't yet seen how the whole system will deal with that private debt. But the public debt is
also becoming a worrying issue and all of it is making the US economy seem as fragile as ever.

THOMAS COOLEY: I think most of the world recognises that right now the US is on an unsustainable
fiscal path. Sooner or later we have to get on a sustainable fiscal path or we will lose the
confidence of the rest of the world.

And so that is a problem that has to be addressed and it hasn't been addressed.

TODD HARRISON: I think Mark Twain famously said history doesn't always repeat but it often rhymes.
And I think that, you know we have to learn from the past or we're destined to repeat it.

CHRIS UHLMANN: Michael Brissenden with that report.