What Caused Our Financial Crisis?

Everyone would like a simple answer to that question, but the answer is far from simple. Even casual research reveals many claimed causes, each with plausible arguments behind them (as well as a lot of claimed causes with nothing much behind them at all). It appears that a host of factors were involved, creating a “perfect storm” which is far from over. Some of the more interesting causes being argued include structural changes made way back in the LBJ administration and regulatory reforms made after the S&L crisis. Now you can add another interesting cause: changes in the bankruptcy laws. All of these possible causes, and many others, share one common feature: the changes were enacted by government for the “public good” – at least that’s what they thought. Now the same institutions which created such havoc are making even more changes for the same reason. I doubt that the results, perhaps decades down the road, will be more helpful.

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