Description
The 2008 financial crisis—like the Great Depression—was a world-historical event. What caused it will be debated for years, if not generations. The conventional narrative is that the financial crisis was caused by Wall Street greed and insufficient regulation of the financial system. That narrative produced the Dodd-Frank Act, the most comprehensive financial-system regulation since the New Deal. There is evidence, however, that the Dodd-Frank Act has slowed the recovery from the recession. If insufficient regulation caused the financial crisis, then the Dodd-Frank Act will never be modified or repealed; proponents will argue that doing so will cause another crisis.
A competing narrative about what caused the financial crisis has received little attention. This view, which is accepted by almost all Republicans in Congress and most conservatives, contends that the crisis was caused by government housing policies. This book extensively documents this view. For example, it shows that in June 2008, before the crisis, 58 percent of all US mortgages were subprime or other low-quality mortgages. Of these, 76 percent were on the books of government agencies such as Fannie Mae and Freddie Mac. When these mortgages defaulted in 2007 and 2008, they drove down housing prices and weakened banks and other mortgage holders, causing the crisis.
After this book is published, no one will be able to claim that the financial crisis was caused by insufficient regulation, or defend Dodd-Frank, without coming to terms with the data this book contains.
About the Author:
PETER J. WALLISON is a senior fellow at the American Enterprise Institute. Before joining AEI in 1999, he practiced law as a partner of Gibson, Dunn & Crutcher in the firm’s Washington and New York offices. He graduated from Harvard Law School in 1966. From 1974 to 1976, he was counsel to Vice President Nelson Rockefeller. He was general counsel of the Treasury Department from 1981 to 1985, and White House counsel for President Ronald Reagan from 1986 to 1987. He is the author or coauthor of several books, including Ronald Reagan: The Power of Conviction and the Success of His Presidency (2003) and Hidden in Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again (Encounter Books, 2015).
