What happened?

What happened during the 2007-8 financial crisis? Here’s a reading from my classes that I think may be of interest to a broader audience: “Getting up to Speed on the Financial Crisis: A One-Weekend-Reader’s Guide” by Gary B. Gorton and Andrew Metrick, writing in January 2012 (PDF from NBER).

Covering 16 sources (academic papers, a few reports by institutions, and Congressional testimony by Bernanke) Gorton and Metrick provide a timeline of the crisis, some historical perspective on past banking crises, the build-up to this crisis, phases of the crisis itself, and government responses.

It’s just 34 pages and interesting throughout — the only shortcoming is that the PDF is rendered in Calibri.

A related article is Andrew Lo’s “Reading About the Financial Crisis: A 21-Book Review” (PDF), which includes this:

No single narrative emerges from this broad and often contradictory collection of interpretations, but the sheer variety of conclusions is informative, and underscores the desperate need for the economics profession to establish a single set of facts from which more accurate inferences and narratives can be constructed.

Discussions of causes are difficult when you don’t agree on the simpler matters of what actually happened — which speaks to the importance of trying to simply get at (as Gorton and Metrick are trying to do) an account of what happened.

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04 2012

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