What Went Wrong? We’re Still Wondering

Stanford economics professor John Taylor has some ideas about the financial crisis. For one, he doesn’t believe that the Fed could have done much more than they did during the eye of the storm. He thinks the real panic that struck didn’t come as a result of Lehman Brothers filing for bankruptcy; it had much more to do with the government’s handling of the institution’s downfall a week later.

Big Think also sat down with Peter Wallison, a financial policy fellow at the American Enterprise Institute. Wallison argues that we’ll never be able to eliminate moral hazard from banking simply because the banks are backed by the government. He argues that it’s no surprise that unregulated entities like hedge funds found themselves in a much better position during the downfall. The reason Fannie Mae and Freddie Mac grew too big to fail was thanks to policies made possible by a labyrinth of Beltway connections. 

A network of top economics bloggers provided some questions for the interviews. They also weigh in on the answers every week:

Economist’s View – Mark Thoma, Professor of Economics, University of Oregon

Economics One – John B. Taylor, Professor of Economics, Stanford University and former Undersecretary for International Affairs, U.S. Treasury Department

The New Republic’s The Stash– Noam Scheiber

The New Yorker’s The Balance Sheet –James Surowiecki – Columnist, and author of bestseller The Wisdom of Crowds

Marginal Revolution – Tyler Cowen, Professor of Economics, George Mason University

Reuters Finance, Felix Salmon

The American Prospect’s Beat the Press – Dean Baker, Professor of Economics, Bucknell University and Co-Director, Center for Economic Policy Research

The Money Illusion – Scott Sumner, Professor of Economics, Bentley University

Café Hayek – Russ Roberts, Professor of Economics, George Mason University and a research fellow at Stanford University’s Hoover Institution

The Atlantic’s Atlantic Business Channel – Dan Indiviglio

The Fly Bottle – Will Wilkinson, Research Fellow, Cato Institute

The Big Questions – Steven Landsburg – Professor of Economics, University of Rochester and Columnist, Slate

Econlog – Arnold Kling, Adjunct Professor of Economics, George Mason University and former employee of both Freddie Mac and the Federal Reserve

The Atlantic’sAsymmetrical Information – Megan McArdle, Managing Editor, The Atlantic

Causes of the Crisis – Jeff Friedman, Visiting Professor of Political Science, University of Texas and Founding Editor, Critical Review,

National Review’sThe Corner/The American Scene – Jim Manzi – Chief Executive Officer, Applied Predictive Technologies

The Economist’sFree Exchange/The Bellows – Ryan Avent, Online Editor, The Economist

Naked Capitalism – Yves Smith, President of Aurora Advisors, and former employee of both Goldman Sachs and McKinsey & Co.