What caused the Great Recession?

In a nutshell, it boils down five steps:

  1. Banks adopting super risky mortgage lending practices (while being egged on by the George W. Bush’s government to make homeownership possible for even low income Americans who wouldn’t be able to normally afford to buy a house)
  2. Wall Street stacking on top of that $50 worth of side bets for every $1 of risky mortgage loans (through a complex web of derivatives that nobody had much experience with, even though ratings firms like Moody’s and S&P and Fitch promised everyone the side bets were AAA rated and safe)
  3. All of this happening amidst a climate of laissez faire deregulation in which regulators were essentially asleep at the wheel (Bush’s top regulators said they wanted to be “kinder, gentler" to the companies they were supposed to be policing, and posed with a chainsaw as if to literally cut regulations)
This didn’t turn out too well.

So, what lessons can we take from this crisis? Here are a few simple ones:

The Great Recession wasn’t unavoidable. But another one will be if we don’t learn these lessons, and probably several more too.

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I’m a documentary filmmaker and all around troublemaker. More at arlenparsa.com.

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Arlen Parsa

Arlen Parsa

I’m a documentary filmmaker and all around troublemaker. More at arlenparsa.com.

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