Better late than never

Confessions of a Financial Deregulator – J. Bradford DeLong – Project Syndicate

Depression-era restrictions on risk seemed less urgent, given the US Federal Reserve’s proven ability to build firewalls between financial distress and aggregate demand. New ways to borrow and to spread risk seemed to have little downside. More competition for investment-banking oligarchs from commercial bankers and insurance companies with deep pockets seemed likely to reduce the investment banking industry’s unconscionable profits.

It seemed worth trying. It wasn’t.

Analytically, we are still picking through the wreckage of this experiment. Why were the risk controls at highly-leveraged money-center universal banks so lousy? Why weren’t central banks and governments willing and able to step up and maintain the flow of aggregate demand as the financial crisis and its aftermath choked off private investment and consumption spending?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: