104 Pages Posted: 23 Sep 2009
Date Written: May 12, 2009
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: 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