Verdict on the Crash: Causes and Policy Implications

104 Pages Posted: 23 Sep 2009  

Philip Booth

City University London - Sir John Cass Business School

Michael Beenstock

Hebrew University of Jerusalem - Department of Economics

Eamonn Butler

Adam Smith Institute

Tim Congdon

Institute of Economic Affairs (IEA)

Laurence Copeland

Cardiff University - Cardiff Business School

Kevin Dowd

Nottingham University Business School (NUBS)

Samuel Gregg

Acton Institute for the Study of Religion and Liberty

John Kay

London School of Economics & Political Science (LSE)

David T. Llewellyn

Loughborough University - Department of Economics

Alan D. Morrison

University of Oxford - Said Business School; University of Oxford - Merton College

D. R. Myddelton

Cranfield University

Anna Schwartz

National Bureau of Economic Research (NBER)

Geoffrey Wood

Cass Business School

James Alexander

affiliation not provided to SSRN

John Greenwood

affiliation not provided to SSRN

Date Written: May 12, 2009

Abstract

This monograph challenges the myth that the recent banking crisis was caused by insufficient statutory regulation of financial markets. Though it finds that statutory regulation failed, and that market participants took more risks than they should have done, it appears that statutory regulation made matters worse rather than better. Furthermore the fifteen experts who have contributed to this study find that government policy failed in other respects too. As with the boom and bust that led to the Great Depression, loose monetary policy on both sides of the Atlantic helped to promote an asset price bubble and credit boom which, at some stage, was bound to have serious consequences. Rejecting the failed approach of discretionary detailed regulation of the financial system, the authors instead propose specific and incisive regulatory tools that are designed to target, in a non-intrusive way, particular weaknesses in a banking system that is backed by deposit insurance. This study, by some of the most eminent authors in the field, is essential reading for all those who are interested in the policy implications of recent events in financial markets.

Keywords: credit crunch, financial crisis, bank bailouts, financial regulation, Financial Services Authority, bank regulation, monetary policy, central banks, Federal Reserve, Fannie Mae, Freddie Mac, Community Reinvestment Act, Bank of England, Alan Greenspan

JEL Classification: E3, E31, E32, E42, E43, E44, E5, E51, E52, E53, E58, G18, G21, G28

Suggested Citation

Booth, Philip and Beenstock, Michael and Butler, Eamonn and Congdon, Tim and Copeland, Laurence and Dowd, Kevin and Gregg, Samuel and Kay, John and Llewellyn, David T. and Morrison, Alan D. and Myddelton, D. R. and Schwartz, Anna and Wood, Geoffrey and Alexander, James and Greenwood, John, Verdict on the Crash: Causes and Policy Implications (May 12, 2009). Institute of Economic Affairs Monographs, No. HPB 37, 2009. Available at SSRN: https://ssrn.com/abstract=1476760

Philip Booth

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Michael Beenstock (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Kfar Etzion 35/4
Jerusalem 91905
Israel
972-2-723-184 (Phone)
972-2-672-5317 (Fax)

Eamonn Butler

Adam Smith Institute ( email )

23 Great Smith Street
London, SW1P 3BL
United Kingdom

Tim Congdon

Institute of Economic Affairs (IEA) ( email )

2 Lord North Street
London SW1P 3LB
United Kingdom

Laurence S. Copeland

Cardiff University - Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 20875740 (Phone)
+44 29 20874419 (Fax)

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

Samuel Gregg

Acton Institute for the Study of Religion and Liberty ( email )

Grand Rapids, MI 49503
United States

John Kay

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

David T. Llewellyn

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain

Alan Morrison

University of Oxford - Said Business School ( email )

Department of Finance
Park End Street
Oxford OX1 1HP
United Kingdom
+44 18 6527 6343 (Phone)
+44 18 6527 6310 (Fax)

University of Oxford - Merton College

Merton Street
Oxford OX1 4JD
United Kingdom
+44 18 6527 6343 (Phone)

D. R. Myddelton

Cranfield University ( email )

Cranfield
Bedfordshire MK43 OAL, MK43 0AL
United Kingdom

Anna Schwartz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Geoffrey E. Wood

Cass Business School ( email )

London, EC2Y 8HB
Great Britain
+44 0 20 7040 8740 (Phone)
+44 0 20 7040 8881 (Fax)

James Alexander

affiliation not provided to SSRN

John Greenwood

affiliation not provided to SSRN

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