Arnold Kling  

Russ Roberts and Joe Nocera

An Instructional Video... Wilson vs. Debs...

In this podcast, they get into a number of interesting issues regarding the financial crisis. Among the things that struck me was Nocera's negative take on the bailout of Bear Stearns, which Nocera evidently thinks was not too big or too interconnected to fail.

As you know, I really liked the Nocera-McLean book. I think it is an important antidote to the view that the crisis was a short-term panic, rather than something that built up over many years due to hubris in Wall Street and Washington.

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COMMENTS (3 to date)
Rob writes:


I recall your flattering review of the Nocera-McLean book. I'm recovering after my first semester of econ grad school and can't wait to dip into some "financial crisis pornography". I started with Lewis' "The Big Short" and this one is next on my list. Give a shout out if you have any more suggestions.

Richard A. writes:

Here is an interesting article stating that the bailout of Goldman Sachs has been quite large.

As it turns out, the government continued to “revitalize” that small sliver of the economy known as Goldman Sachs. During the three months following Goldman’s re-payment of its $10 billion TARP loan, the Fed purchased $27 billion of MBS from Goldman. In all, the Fed would purchase more than $100 billion of MBS from Goldman during the 12 months that followed Goldman’s TARP re-payment.
ed writes:
"crisis was a short-term panic, rather than something that built up over many years."

It was both.

It was short term in that in the fall of 2008 there was a real danger of a fear-induced domino effect where the major banks might not be able to meet short term obligations, even though most were basically solvent (as shown by their quick repayment of TARP loans.)

It was long term in the sense that there were large, real, long-term losses, mainly in securitized mortgage lending. That is the main reason all the banks are valued at a lot less than they were before the crisis, and bank shareholders have suffered huge losses.

(I think Arnold disagrees with this description, but I can't figure out why or how.)

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