An Autopsy of the U.S. Financial System: Accident, Suicide, or Negligent Homicide?
34 Pages Posted: 15 Apr 2010 Last revised: 28 Apr 2010
Date Written: April 13, 2010
Abstract
In this postmortem, I find that the design, application, 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 (“accident”) and the herding behavior of financiers rushing to create and use increasingly complex and questionable financial products (“suicide”). Rather, the evidence indicates that regulatory agencies were aware of the growing fragility of the financial system associated with their policies and yet chose not to modify those policies, suggesting that “negligent homicide” contributed to the financial system’s collapse.
Keywords: Financial Institutions, Regulation, Policy, Financial Crisis
JEL Classification: G20, G28, H1, E6
Suggested Citation: Suggested Citation