An Autopsy of the U.S. Financial System
In this postmortem, I find that the design, implementation, and maintenance of financial policies during the period from 1996 through 2006 were primary causes of the financial system's demise. The evidence is inconsistent with the view that the collapse of the financial system was caused only by the popping of the housing bubble and the herding behavior of financiers rushing to create and market increasingly complex and questionable financial products. Rather, the evidence indicates that regulatory agencies were aware of the growing fragility of the financial system associated with their policies during the decade before the crisis and yet chose not to modify those policies.
I thank James Barth, John Boyd, Gerard Caprio, Peter Howitt, Glenn Loury, Yona Rubinstein, Andrei Shleifer, Joe Stiglitz, David Weil, and Ivo Welch for helpful conversations and communications. Seminar participants at the Boston and Chicago Federal Reserves and the IMF provided insightful comments. I bear full responsibility for the views expressed in the paper. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
“An Autopsy of the U.S. Financial System: Accident, Suicide, or Murder?” Journal of Financial Economic Policy, 2010 2(3), 196 - 213.