After seven years of hindsight, the conventional explanation for the world’s second greatest financial crisis remains the same: The private banking sector was insufficiently regulated, allowing Wall Street to engage in excessive risk-taking behavior and questionable trading practices, thus triggering the sudden burst of the housing bubble and collapse of housing prices.
This narrative is emotionally powerful and inherently appealing, featuring duplicitous money-grubbing on the one hand, and individual suffering on the other. It evokes politically convenient class divisions, pitting wealthy corporate executives against ordinary Americans being evicted from their homes.
Villains and victims do not alone offer a compelling story, however. A hero is also needed. Fulfilling this role is the federal government, stepping in just in time to prevent catastrophic collapse, and acting subsequently to punish those responsible (enter Dodd–Frank). The story also has a moral: Extensive regulatory oversight is necessary to protect Americans from a predatory financial sector.
There’s only one part missing from the story: a happy ending. Despite enormous federal intervention in the economy, America’s post-recession recovery has been one of the worst in history.
How can we account for this? Years after the crisis, mounting evidence is beginning to support an alternative explanation.
Peter J. Wallison, the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute and former White House Counsel to President Ronald Reagan, visited The Heritage Foundation last month to discuss his new book, “Hidden in Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why it Could Happen Again.”
Wallison’s in-depth, data-driven analysis offers a very different story from the prevailing and oft-repeated narrative of corporate greed. His conclusion? The financial crisis could not have occurred if not for a series of fundamentally flawed government policies.
http://dailysignal.com/2015/02/27/g...ocial&utm_campaign=thf02272015FINANCIALCRISIS
This narrative is emotionally powerful and inherently appealing, featuring duplicitous money-grubbing on the one hand, and individual suffering on the other. It evokes politically convenient class divisions, pitting wealthy corporate executives against ordinary Americans being evicted from their homes.
Villains and victims do not alone offer a compelling story, however. A hero is also needed. Fulfilling this role is the federal government, stepping in just in time to prevent catastrophic collapse, and acting subsequently to punish those responsible (enter Dodd–Frank). The story also has a moral: Extensive regulatory oversight is necessary to protect Americans from a predatory financial sector.
There’s only one part missing from the story: a happy ending. Despite enormous federal intervention in the economy, America’s post-recession recovery has been one of the worst in history.
How can we account for this? Years after the crisis, mounting evidence is beginning to support an alternative explanation.
Peter J. Wallison, the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute and former White House Counsel to President Ronald Reagan, visited The Heritage Foundation last month to discuss his new book, “Hidden in Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why it Could Happen Again.”
Wallison’s in-depth, data-driven analysis offers a very different story from the prevailing and oft-repeated narrative of corporate greed. His conclusion? The financial crisis could not have occurred if not for a series of fundamentally flawed government policies.
http://dailysignal.com/2015/02/27/g...ocial&utm_campaign=thf02272015FINANCIALCRISIS
