Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Financial Crisis Manual Causes, Consequences, and Lessons of the Financial Crisis

Contents:

Author Info

  • Ben Beachy
Registered author(s):

    Abstract

    On the fifth anniversary of the beginning of the Great Recession, there is still no consensus on the lessons to be gleaned from the lingering crisis. What provoked the largest financial and economic collapse in decades? While the housing bubble and subprime mortgage lending boom provide clear proximate causes, skewed financial sector incentives, errant economic assumptions, and inequitable socioeconomic structures laid the groundwork for crisis. The complex web of underlying factors extends from a 1960s-era economic hypothesis to the deregulation of interstate banking to a shift in how Wall Street CEOs are paid. This paper traces that causal web for a generalist audience, summarizes how the financial crisis morphed into an economy-wide recession, and synthesizes proposals for how to prevent its recurrence. Such proposals are not limited to efforts to rein in Wall Street, as exemplified by the sweeping Dodd-Frank financial reform law, but also include initiatives to harness Wall Street’s vast resources for the needs of the real economy. Meanwhile, the crisis amplified calls to address crisisprone disequilibria in the U.S. economy, and to alter the study of economics itself. As the country continues to grapple with the economic fallout of financial meltdown, such proposals merit continued discussion.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ase.tufts.edu/gdae/Pubs/wp/12-06BeachyFinancialCrisis.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by GDAE, Tufts University in its series GDAE Working Papers with number 12-06.

    as in new window
    Length:
    Date of creation: Dec 2012
    Date of revision:
    Handle: RePEc:dae:daepap:12-06

    Contact details of provider:
    Postal: 44 Teele Avenue Medford, MA 02155
    Phone: 617-627-3530
    Fax: 617-627-2409
    Email:
    Web page: http://ase.tufts.edu/gdae
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Yuliya Demyanyk & Otto Van Hemert, 2011. "Understanding the Subprime Mortgage Crisis," Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 1848-1880.
    2. Reinhart, Carmen & Felton, Andrew, 2008. "The First Global Financial Crisis of the 21st Century," MPRA Paper 11862, University Library of Munich, Germany.
    3. Michael D. Hurd & Susann Rohwedder, 2010. "Effects of the Financial Crisis and Great Recession on American Households," NBER Working Papers 16407, National Bureau of Economic Research, Inc.
    4. James Crotty, 2008. "Structural Causes of the Global Financial Crisis: A Critical Assessment of the ‘New Financial Architecture’," Working Papers wp180, Political Economy Research Institute, University of Massachusetts at Amherst.
    5. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation for Research in Economics, Yale University.
    6. Lucian A. Bebchuk & Jesse M. Fried, 2005. "Pay Without Performance: Overview of the Issues," Journal of Applied Corporate Finance, Morgan Stanley, vol. 17(4), pages 8-23.
    7. Deniz Igan & Thierry Tressel & Prachi Mishra, 2009. "A Fistful of Dollars," IMF Working Papers 09/287, International Monetary Fund.
    8. Bicchetti, David & Maystre, Nicolas Maystre, 2013. "The synchronized and long-lasting structural change on commodity markets: Evidence from high frequency data," Algorithmic Finance, IOS Press, vol. 2(3-4), pages 233-239.
    9. Dean Baker, 2011. "The End of Loser Liberalism: Making Markets Progressive," CEPR Books, Center for Economic and Policy Research (CEPR), number 2011-01.
    10. Penas, Maria Fabiana & Unal, Haluk, 2004. "Gains in bank mergers: Evidence from the bond markets," Journal of Financial Economics, Elsevier, vol. 74(1), pages 149-179, October.
    11. Markus Christen & Ruskin Morgan, 2005. "Keeping Up With the Joneses: Analyzing the Effect of Income Inequality on Consumer Borrowing," Quantitative Marketing and Economics, Springer, vol. 3(2), pages 145-173, June.
    12. Stephan Schulmeister, 2009. "A General Financial Transaction Tax: A Short Cut of the Pros, the Cons and a Proposal," WIFO Working Papers 344, WIFO.
    13. Fabrizio Perri & Joe Steinberg, 2012. "Inequality and redistribution during the Great Recession," Economic Policy Paper 12-1, Federal Reserve Bank of Minneapolis.
    14. Kane, Edward J, 2000. "Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 671-701, August.
    15. Alan Blinder, 2010. "Teaching Macro Principles after the Financial Crisis," The Journal of Economic Education, Taylor & Francis Journals, vol. 41(4), pages 385-390, September.
    16. Dean Baker & Robert Pollin & Travis McArthur & Matt Sherman, 2009. "The Potential Revenue from Financial Transactions Taxes," Working Papers wp212, Political Economy Research Institute, University of Massachusetts at Amherst.
    17. Esther-Mirjam Sent, 2004. "Behavioral Economics: How Psychology Made Its (Limited) Way Back Into Economics," History of Political Economy, Duke University Press, vol. 36(4), pages 735-760, Winter.
    18. Reinhart, Carmen & Felton, Andrew, 2009. "The first global financial crisis of the 21st century: Part II, June-December, 2008," MPRA Paper 13604, University Library of Munich, Germany.
    19. Bezemer, Dirk, 2009. "No one saw this coming. Understanding financial crisis through accounting models," Research Report 09002, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    20. Jacob de Haan & Tigran Poghosyan, 2011. "Bank Size, Market Concentration, and Bank Earnings Volatility in the US," DNB Working Papers 282, Netherlands Central Bank, Research Department.
    21. Alan S. Blinder, 2010. "Teaching Macro Principles after the Financial Crisis," Working Papers 1222, Princeton University, Department of Economics, Center for Economic Policy Studies..
    22. Martin Hellwig, 2009. "Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis," De Economist, Springer, vol. 157(2), pages 129-207, June.
    23. Demsetz, Rebecca S & Strahan, Philip E, 1997. "Diversification, Size, and Risk at Bank Holding Companies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 300-313, August.
    24. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, octubre-d.
    25. Hallock, Kevin F., 1997. "Reciprocally Interlocking Boards of Directors and Executive Compensation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(03), pages 331-344, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Miklós Antal & Jeroen C.J.M. van den Bergh, 2014. "Macroeconomics, Financial Crisis and the Environment. Strategies for a Sustainability Transition," WIFO Working Papers 464, WIFO.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:dae:daepap:12-06. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Erin Coutts).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.