7 ms·

The dangerous myth still believed about the Lehman Brothers bust

111 points by rfreytag 8y ago

sgift 8y ago
https://outline.com/MxvDb6 https://outline.com/MxvDb6
lordnacho 8y ago
This is basically right. It's a myth that anyone believed in any of the stronger forms of efficient markets. The interaction of ineffective regulation and political lobbying had a lot to do with the crisis. Related myth is the idea that nobody saw it coming. I went to a luncheon at Goldman's in 2006 where they announced things would start looking rocky in 2007 and the big whammy would be 2008.
- hardlianotion 8y ago
  Yes - the Associate class training of Lehmans in 2005 had a few speakers that were warning of an oncoming crisis. And the folk on the mortgage desks had early view of the problems that were becoming unmanageable.
  - philipodonnell 8y ago
    Is there any sense of something like that happening today?
    - hardlianotion 8y ago
      I work far away from that sort of thing now.
d--b 8y ago
> The answer is that the capture of Congress by financial lobbies ensured the balkanization of regulation into an alphabet soup of agencies, many of them underfunded and ineffective. I thought at this stage everybody knew that already.
curiousgal 8y ago
So it boils down to the U.S.' broken political system? If the effects of a financial crisis are felt across the globe, why not have an international comitee that regulates the markets? One that is not prone to lobbyists and campaign contribution mania?
- namdnay 8y ago
  Because then populists could score cheap points by railing against “unelected bureaucrats”... e.g Brexit
  - bnastic 8y ago
    It would never ever work, and it would in fact be all "unelected bureaucrats"
  - jstanley 8y ago
    So the problem with having unelected bureaucrats is that it is too easy to come up with arguments against having them?
- sp332 8y ago
  How would you choose members of the committee in a way that doesn't involve campaigns? How would they make decisions without being open to lobbying?
  - JetSpiegel 8y ago
    Shorter campaign cycles and a cap on expenditures. Abolishing PAC.
    - sp332 8y ago
      Curiousgal mentioned an international committee. You'd have to get global agreement and enforcement to ban PACs first.
cdoxsey 8y ago
Also Bahnsen's book, Crisis of Responsibility, which makes the point that everyone blames wall street or the government, but no one talks about main street's culpability. At one time it was considered an iron clad rule that Americans would always pay their mortgage. But something changed in the American character and suddenly millions of Americans were fine with defaulting on their debts. There's plenty of blame to go around, but this recent turn to populism in the wake of the financial crisis is particularly ugly for its rank hypocrisy.
- rl3 8y ago
  >But something changed in the American character and suddenly millions of Americans were fine with defaulting on their debts. That narrative should be licensed to Disney as a fairy tale.
  - cdoxsey 8y ago
    People took on mortgages they couldn't afford: > 70 percent of defaulted loans had blatant misrepresentations on their mortgage applications. The FBI estimates that mortgage fraud (by borrowers) increased 1,000 percent from 2001 to 2007. And they defaulted strategically to make money: > They also discovered these sorts of events—the abandonment of a mortgage obligation to pay when people were perfectly able to pay—represented fully 20 to 30 percent of the delinquencies that took place in 2007 and 2008
    - XorNot 8y ago
      Because the houses weren't worth anywhere near what they were paying for them and no one would bat an eye if a business did it. The illusion that the American business community deserves moral consideration has been used to fleece the general public for years.
    - pixl97 8y ago
      People have always attempted to take on mortgages they could not afford. In the more distant past banks turned these fraudulent loans down to protect themselves. In the mid 2000s, mortgage lenders were working with the customers, agents at countrywide for example, were helping their customers fill out documents fraudulently. (Years later a few would go to prison for this.) This was not a failure at the bottom, the system allowed those who would attempt to commit fraud, commit said fraud because they profited from it.
sgt101 8y ago
In the end the only strong indicator of economic success in the long term seems to be the quality of the rule of law in a jurisdiction. It's not that the rule of law in the USA is poor compared to everywhere else, but that it could be made better still and this would be a way for the USA to both continue its global leadership and to better deserve its global leadership.
roenxi 8y ago
(preface: I'm not an American, I'm just interested!) The language used to talk about economics is so technical that any talk about what is or isn't still believed is practically unknowable. I'd accept that there is a consensus on "it is obvious what the problem was when Lehman went bust", and simultaneously that there is no consensus on "what was the problem was when Lehman went bust". This article talks in general and specific terms about the regulatory framework. Seems reasonable. But in this age of fractured politics (where no blow is too low) an opinion piece is either preaching to the choir or being completely ignored. Macroeconomics has a major theme - how to divide the economic pie up in a manner that encourages people to contribute to said pie. I'd rather know who is still talking seriously about the growing and contributing part of that theme and whether they are currently in charge or currently not in charge of the financial system. Modern economic management is really focused around debt (c.f. how the money supply is enlarged and how quickly that happens in the US). After 2008, it isn't obvious whether the debt-based approach is growing the pie as there seem to be a real indicators that are not promising. I suspect that debt is simply moving pieces of the pie around. But intead of establishing these broad and general strokes of the picture people do love to dive into the detail of regulation where they are going to make mistakes, be wrong and get defensive about points that ultimately do not matter.
- pas 8y ago
  Economies are debt based since the invention of debt basically. Debt-basedness is not the problem. Nor is the balance sheet of central banks. Inflation is low despite huge QE programs. The problem is that there is no countercyclical program to save for the eventual downturn. (Important note, there never really was. Centuries ago villages disappeared, cities emptied out, thousands died from starvation, crime was worse, and armed conflict coming to town was very much always a possibility). Sure there are social support systems in many countires. The US has a very inefficient one, it doesn't really help getting out of the gutter.
  - stephen_g 8y ago
    Interesting thing about debt is that there is evidence supporting the view that debt predates money, and money came about to represent that (not, as Adam Smith postulated that there were bartering economies and then money came in as a more efficient way of trading) - see https://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051 https://www.theatlantic.com/business/archive/2016/02/barter-...
TheOtherHobbes 8y ago
This is counterfactual nonsense. Greenspan supported the repeal of Glass-Steagall, and also supported the Commodities Futures Modernization Act, which did a huge amount to legitimise Credit Default Swaps. He opposed HOEPA oversight by the Fed of fraudulent liar's loans by unregulated lenders. He was on the wrong side of multiple conflicts of interest, including some related to Enron's SPV frauds. While Greenspan was giving PR-scented talks about the renewal of trust in the markets after the regrettable failures of the Enron years, the FBI was warning there was an epidemic of mortgage fraud. So - no. Greenspan was not a misunderstood and essentially powerless economic moralist. He was at ground zero of the crash, and deserves a significant share of the blame for it.
- godzillabrennus 8y ago
  Everything I’ve read on the subject supports that Greenspan played a significant role in creating the crash of 2008 and unfortunately his disciples have been running the show since. We are in a debt fueled rally that will crash and we might be out of ammo to keep the system going.
  - chiefalchemist 8y ago
    What have we learned? What has changed? The answer to both seems to be: not much.
    - wallace_f 8y ago
      I'm sure it can get much worse once the whole world's monetary fate is under the auspices of centralized monetary unions. Without the influence of competitive forces, the Fed will remain. When competitive forces necessitated 'survival of the fittest,' congress took over control of the money supply. This was demanded of the US government during the Civil War when there was an actual threat of: 'we will die if we don't act in the best interests of The Union.' Perhaps the only thing more exasperating than the Fed's transfer of wealth from money holders to the Wall St economy (and minimally, the US govt) is the weasly arguments used to justify it: "Creating 4 trillion dollars and helicoptering it to Wall St is fine because inflation didn't rise, so therefore the money was free thanks to our clever understanding of economics." In other words, due to magic, the Fed creates value out of thin air... Oh but they can only share it with Wall St because otherwise they will crash the US economy.
fnrslvr 8y ago
If key figures at the federal reserve didn't (don't?) believe in the self-regulating power of a free market, that's nice, but this article still seems to suggest that said belief is still alive and well among highly influential figures in the economy, i.e. those financial lobbyists or their interest groups must either a) Believe that a free market can police itself; or b) Be so myopically hell-bent on the bottom lines of their interest groups that they're willing to recklessly sabotage important regulatory impediments to meet their ends. Either way, a lot of powerful people could still probably stand to be admonished on the importance of well-enforced regulations, even if those admonitions are embarrassingly basic. Am I missing something here?
- cinquemb 8y ago
  The thing is, both of those are irrelevant in the long term, because there will be a time under either scenario where a) or b) will not protect their six or their balance sheets.
ohiovr 8y ago
Seems to be trendy these days to say that there is going to be another downturn or collapse whereas in 2007 saying such things you might be branded as a heretic. Ever since 2009 some people made careers out of saying there is going to be a collapse, indeed Zero Hedge has predicted 11 of the last 7 doomsday collapses in the USA since then. I've come to see people like Zero Hedge, Jim Rogers, Peter Schiff, as permabears and as such not too interesting to hear about their particular predictions. The massive inflation never happened, and there was no collapse. But what is interesting is that there is a chorus from the opposite end now, that is saying it is inevitable. That seems unusual. Seems that the concensus among these sorts say that things will probably be fine till about 2020 then it blows up. It being about everything that is overvalued, which is also nearly everything. I actually lost the entire bull run because of fear. I figure this stuff is being dredged up because of the 10 year anniversary of 2008. The whole world is going to change by April next year, I think the US economy might be chugging along even in spite of the hell everyone else is about to endure in their markets because Trumps tax cut is basically a multi-trillion dollar cash stimulus in the economy that goes broadly to nearly everyone. I made a couple observations: The fed is now afraid to show its cards. No longer will it give forward guidance because they are not actually sure what they need to do. If they raise rates they risk collapsing prices on debt instruments, if they lower rates they fear inflation. As for protecting the currency, they don't need to do that. The dollar is already a policy nightmare for most of the world as to its current value. Inflation isn't bad at all either. Employment is as good as it gets I think. So why raise rates? But this is their plan. They plan to raise rates all the way to 2020 (familiar year reported) and then... what? Also, I've been seeing ads for adjustable rate mortgages at very low rates. Are they going to reset everyone's mortgage in 2019 causing a huge downwind pressure on home prices? That seems to be the 2006 2007 2008 pattern all over again.
- todorstoyanov 8y ago
  Why April next year? Do you got some event in mind?
  - ohiovr 8y ago
    Month after brexit of course
tonetheman 8y ago
Man that was hard to read...
arminiusreturns 8y ago
Let me know when people are ready to get down to brass tacks about the Fed; that it is an unconstitutional abrogation of the congress's powers, that it was created and passed under the most dubious of circumstances and by the most duplicitous group of people, and that the very banks that cause it's various crashes are the ones who own it and run it and bail themselves out. The FOMC is corrupt. The POTUS can do nothing other than appoint the board and hope they do what is needed. People let the economists use word-salad to confuse and obfuscate matters, and this article is just naive whitewashing that does no root cause analysis and ignores the rca that has already been done. when speaking about the financial system, I am often reminded of Ralph Waldo Emerson, "For a thousand hacking at the branches of evil, only one is striking at the root."
DubiousPusher 8y ago
This is bananas. This is like piling explosives around the base of every skyscraper in Manhattan, connecting it all up with fuses and then blaming the ignition of that fuse for the ensuing disaster. Yes, we get it. Mortgage credit was too easy to come by in the 2000s. That availability was driven by government subsidized lending. But that bubble should've burst and triggered a recession that was perhaps a bit worse than ordinary. It left a crater in the global economy because the financial products it tourched off happened to connect every major financial institution in a way I don't think anyone understood until the autopsies of the Great Recession started to come in.
- TimJYoung 8y ago
  Yeah, I can't remember the exact numbers being thrown around at the time, but it was in the many trillions of dollars of derivatives that had been created. If you replace the word "derivatives" with "bets", you get a better understanding of how far astray Wall Street has led us. The fact that these "bets" jeopardized the health and wellbeing of millions of people around the globe is direct evidence that regulators and central bankers were either inept, corrupt, or both.
- InclinedPlane 8y ago
  The government was not responsible for the sub-prime mortgage crisis, only a tiny fraction of sub-prime loans were due to legal mandates (6%). https://www.cbsnews.com/news/loans-to-low-income-households-did-not-cause-the-financial-crisis/ https://www.cbsnews.com/news/loans-to-low-income-households-...
  - DubiousPusher 8y ago
    I'm saying it doesn't matter either way. To me it doesn't matter who built or lit the fuse. The piles of interconnecting ordinance were the derivatives. Any asset in a bubble that had decent exposure in a derivatives market could've triggered the disaster. The layers of deals too complex for anyone to understand that entwined many major financial firms are what made the Great Recession "Great".
deleted 8y ago
[deleted]
woodandsteel 8y ago
If, as the author claims, the economists all knew the efficient market hypothesis is mistaken, then why didn't they inform the public during the bubble, and get it to pressure the politicans to regulate the financial markets? Also, whether or not the economists believed in the efficient market hypothesis at the time, the conservatives and libertarians sure did, and they continue to do so.

111 points by rfreytag 8y ago

https://outline.com/MxvDb6 https://outline.com/MxvDb6

This is basically right. It's a myth that anyone believed in any of the stronger forms of efficient markets. The interaction of ineffective regulation and political lobbying had a lot to do with the crisis. Related myth is the idea that nobody saw it coming. I went to a luncheon at Goldman's in 2006 where they announced things would start looking rocky in 2007 and the big whammy would be 2008.

hardlianotion 8y ago
Yes - the Associate class training of Lehmans in 2005 had a few speakers that were warning of an oncoming crisis. And the folk on the mortgage desks had early view of the problems that were becoming unmanageable.
- philipodonnell 8y ago
  Is there any sense of something like that happening today?
  - hardlianotion 8y ago
    I work far away from that sort of thing now.

d--b 8y ago

> The answer is that the capture of Congress by financial lobbies ensured the balkanization of regulation into an alphabet soup of agencies, many of them underfunded and ineffective. I thought at this stage everybody knew that already.

curiousgal 8y ago

So it boils down to the U.S.' broken political system? If the effects of a financial crisis are felt across the globe, why not have an international comitee that regulates the markets? One that is not prone to lobbyists and campaign contribution mania?

namdnay 8y ago
Because then populists could score cheap points by railing against “unelected bureaucrats”... e.g Brexit
- bnastic 8y ago
  It would never ever work, and it would in fact be all "unelected bureaucrats"
- jstanley 8y ago
  So the problem with having unelected bureaucrats is that it is too easy to come up with arguments against having them?
sp332 8y ago
How would you choose members of the committee in a way that doesn't involve campaigns? How would they make decisions without being open to lobbying?
- JetSpiegel 8y ago
  Shorter campaign cycles and a cap on expenditures. Abolishing PAC.
  - sp332 8y ago
    Curiousgal mentioned an international committee. You'd have to get global agreement and enforcement to ban PACs first.

cdoxsey 8y ago

Also Bahnsen's book, Crisis of Responsibility, which makes the point that everyone blames wall street or the government, but no one talks about main street's culpability. At one time it was considered an iron clad rule that Americans would always pay their mortgage. But something changed in the American character and suddenly millions of Americans were fine with defaulting on their debts. There's plenty of blame to go around, but this recent turn to populism in the wake of the financial crisis is particularly ugly for its rank hypocrisy.

rl3 8y ago
>But something changed in the American character and suddenly millions of Americans were fine with defaulting on their debts. That narrative should be licensed to Disney as a fairy tale.
- cdoxsey 8y ago
  People took on mortgages they couldn't afford: > 70 percent of defaulted loans had blatant misrepresentations on their mortgage applications. The FBI estimates that mortgage fraud (by borrowers) increased 1,000 percent from 2001 to 2007. And they defaulted strategically to make money: > They also discovered these sorts of events—the abandonment of a mortgage obligation to pay when people were perfectly able to pay—represented fully 20 to 30 percent of the delinquencies that took place in 2007 and 2008
  - XorNot 8y ago
    Because the houses weren't worth anywhere near what they were paying for them and no one would bat an eye if a business did it. The illusion that the American business community deserves moral consideration has been used to fleece the general public for years.
  - pixl97 8y ago
    People have always attempted to take on mortgages they could not afford. In the more distant past banks turned these fraudulent loans down to protect themselves. In the mid 2000s, mortgage lenders were working with the customers, agents at countrywide for example, were helping their customers fill out documents fraudulently. (Years later a few would go to prison for this.) This was not a failure at the bottom, the system allowed those who would attempt to commit fraud, commit said fraud because they profited from it.

sgt101 8y ago

In the end the only strong indicator of economic success in the long term seems to be the quality of the rule of law in a jurisdiction. It's not that the rule of law in the USA is poor compared to everywhere else, but that it could be made better still and this would be a way for the USA to both continue its global leadership and to better deserve its global leadership.

roenxi 8y ago

(preface: I'm not an American, I'm just interested!) The language used to talk about economics is so technical that any talk about what is or isn't still believed is practically unknowable. I'd accept that there is a consensus on "it is obvious what the problem was when Lehman went bust", and simultaneously that there is no consensus on "what was the problem was when Lehman went bust". This article talks in general and specific terms about the regulatory framework. Seems reasonable. But in this age of fractured politics (where no blow is too low) an opinion piece is either preaching to the choir or being completely ignored. Macroeconomics has a major theme - how to divide the economic pie up in a manner that encourages people to contribute to said pie. I'd rather know who is still talking seriously about the growing and contributing part of that theme and whether they are currently in charge or currently not in charge of the financial system. Modern economic management is really focused around debt (c.f. how the money supply is enlarged and how quickly that happens in the US). After 2008, it isn't obvious whether the debt-based approach is growing the pie as there seem to be a real indicators that are not promising. I suspect that debt is simply moving pieces of the pie around. But intead of establishing these broad and general strokes of the picture people do love to dive into the detail of regulation where they are going to make mistakes, be wrong and get defensive about points that ultimately do not matter.

pas 8y ago
Economies are debt based since the invention of debt basically. Debt-basedness is not the problem. Nor is the balance sheet of central banks. Inflation is low despite huge QE programs. The problem is that there is no countercyclical program to save for the eventual downturn. (Important note, there never really was. Centuries ago villages disappeared, cities emptied out, thousands died from starvation, crime was worse, and armed conflict coming to town was very much always a possibility). Sure there are social support systems in many countires. The US has a very inefficient one, it doesn't really help getting out of the gutter.
- stephen_g 8y ago
  Interesting thing about debt is that there is evidence supporting the view that debt predates money, and money came about to represent that (not, as Adam Smith postulated that there were bartering economies and then money came in as a more efficient way of trading) - see https://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051 https://www.theatlantic.com/business/archive/2016/02/barter-...

TheOtherHobbes 8y ago

This is counterfactual nonsense. Greenspan supported the repeal of Glass-Steagall, and also supported the Commodities Futures Modernization Act, which did a huge amount to legitimise Credit Default Swaps. He opposed HOEPA oversight by the Fed of fraudulent liar's loans by unregulated lenders. He was on the wrong side of multiple conflicts of interest, including some related to Enron's SPV frauds. While Greenspan was giving PR-scented talks about the renewal of trust in the markets after the regrettable failures of the Enron years, the FBI was warning there was an epidemic of mortgage fraud. So - no. Greenspan was not a misunderstood and essentially powerless economic moralist. He was at ground zero of the crash, and deserves a significant share of the blame for it.

godzillabrennus 8y ago
Everything I’ve read on the subject supports that Greenspan played a significant role in creating the crash of 2008 and unfortunately his disciples have been running the show since. We are in a debt fueled rally that will crash and we might be out of ammo to keep the system going.
- chiefalchemist 8y ago
  What have we learned? What has changed? The answer to both seems to be: not much.
  - wallace_f 8y ago
    I'm sure it can get much worse once the whole world's monetary fate is under the auspices of centralized monetary unions. Without the influence of competitive forces, the Fed will remain. When competitive forces necessitated 'survival of the fittest,' congress took over control of the money supply. This was demanded of the US government during the Civil War when there was an actual threat of: 'we will die if we don't act in the best interests of The Union.' Perhaps the only thing more exasperating than the Fed's transfer of wealth from money holders to the Wall St economy (and minimally, the US govt) is the weasly arguments used to justify it: "Creating 4 trillion dollars and helicoptering it to Wall St is fine because inflation didn't rise, so therefore the money was free thanks to our clever understanding of economics." In other words, due to magic, the Fed creates value out of thin air... Oh but they can only share it with Wall St because otherwise they will crash the US economy.

fnrslvr 8y ago

If key figures at the federal reserve didn't (don't?) believe in the self-regulating power of a free market, that's nice, but this article still seems to suggest that said belief is still alive and well among highly influential figures in the economy, i.e. those financial lobbyists or their interest groups must either a) Believe that a free market can police itself; or b) Be so myopically hell-bent on the bottom lines of their interest groups that they're willing to recklessly sabotage important regulatory impediments to meet their ends. Either way, a lot of powerful people could still probably stand to be admonished on the importance of well-enforced regulations, even if those admonitions are embarrassingly basic. Am I missing something here?

cinquemb 8y ago
The thing is, both of those are irrelevant in the long term, because there will be a time under either scenario where a) or b) will not protect their six or their balance sheets.

ohiovr 8y ago

Seems to be trendy these days to say that there is going to be another downturn or collapse whereas in 2007 saying such things you might be branded as a heretic. Ever since 2009 some people made careers out of saying there is going to be a collapse, indeed Zero Hedge has predicted 11 of the last 7 doomsday collapses in the USA since then. I've come to see people like Zero Hedge, Jim Rogers, Peter Schiff, as permabears and as such not too interesting to hear about their particular predictions. The massive inflation never happened, and there was no collapse. But what is interesting is that there is a chorus from the opposite end now, that is saying it is inevitable. That seems unusual. Seems that the concensus among these sorts say that things will probably be fine till about 2020 then it blows up. It being about everything that is overvalued, which is also nearly everything. I actually lost the entire bull run because of fear. I figure this stuff is being dredged up because of the 10 year anniversary of 2008. The whole world is going to change by April next year, I think the US economy might be chugging along even in spite of the hell everyone else is about to endure in their markets because Trumps tax cut is basically a multi-trillion dollar cash stimulus in the economy that goes broadly to nearly everyone. I made a couple observations: The fed is now afraid to show its cards. No longer will it give forward guidance because they are not actually sure what they need to do. If they raise rates they risk collapsing prices on debt instruments, if they lower rates they fear inflation. As for protecting the currency, they don't need to do that. The dollar is already a policy nightmare for most of the world as to its current value. Inflation isn't bad at all either. Employment is as good as it gets I think. So why raise rates? But this is their plan. They plan to raise rates all the way to 2020 (familiar year reported) and then... what? Also, I've been seeing ads for adjustable rate mortgages at very low rates. Are they going to reset everyone's mortgage in 2019 causing a huge downwind pressure on home prices? That seems to be the 2006 2007 2008 pattern all over again.

todorstoyanov 8y ago
Why April next year? Do you got some event in mind?
- ohiovr 8y ago
  Month after brexit of course

tonetheman 8y ago

Man that was hard to read...

arminiusreturns 8y ago

Let me know when people are ready to get down to brass tacks about the Fed; that it is an unconstitutional abrogation of the congress's powers, that it was created and passed under the most dubious of circumstances and by the most duplicitous group of people, and that the very banks that cause it's various crashes are the ones who own it and run it and bail themselves out. The FOMC is corrupt. The POTUS can do nothing other than appoint the board and hope they do what is needed. People let the economists use word-salad to confuse and obfuscate matters, and this article is just naive whitewashing that does no root cause analysis and ignores the rca that has already been done. when speaking about the financial system, I am often reminded of Ralph Waldo Emerson, "For a thousand hacking at the branches of evil, only one is striking at the root."

DubiousPusher 8y ago

This is bananas. This is like piling explosives around the base of every skyscraper in Manhattan, connecting it all up with fuses and then blaming the ignition of that fuse for the ensuing disaster. Yes, we get it. Mortgage credit was too easy to come by in the 2000s. That availability was driven by government subsidized lending. But that bubble should've burst and triggered a recession that was perhaps a bit worse than ordinary. It left a crater in the global economy because the financial products it tourched off happened to connect every major financial institution in a way I don't think anyone understood until the autopsies of the Great Recession started to come in.

TimJYoung 8y ago
Yeah, I can't remember the exact numbers being thrown around at the time, but it was in the many trillions of dollars of derivatives that had been created. If you replace the word "derivatives" with "bets", you get a better understanding of how far astray Wall Street has led us. The fact that these "bets" jeopardized the health and wellbeing of millions of people around the globe is direct evidence that regulators and central bankers were either inept, corrupt, or both.
InclinedPlane 8y ago
The government was not responsible for the sub-prime mortgage crisis, only a tiny fraction of sub-prime loans were due to legal mandates (6%). https://www.cbsnews.com/news/loans-to-low-income-households-did-not-cause-the-financial-crisis/ https://www.cbsnews.com/news/loans-to-low-income-households-...
- DubiousPusher 8y ago
  I'm saying it doesn't matter either way. To me it doesn't matter who built or lit the fuse. The piles of interconnecting ordinance were the derivatives. Any asset in a bubble that had decent exposure in a derivatives market could've triggered the disaster. The layers of deals too complex for anyone to understand that entwined many major financial firms are what made the Great Recession "Great".

deleted 8y ago

[deleted]

woodandsteel 8y ago

If, as the author claims, the economists all knew the efficient market hypothesis is mistaken, then why didn't they inform the public during the bubble, and get it to pressure the politicans to regulate the financial markets? Also, whether or not the economists believed in the efficient market hypothesis at the time, the conservatives and libertarians sure did, and they continue to do so.