Leverage Caused the 2007-2009 Crisis

@article{Geanakoplos2019LeverageCT,
  title={Leverage Caused the 2007-2009 Crisis},
  author={John Geanakoplos},
  journal={Systemic Risk in the Financial Sector},
  year={2019}
}
  • J. Geanakoplos
  • Published 2 October 2019
  • Business
  • Systemic Risk in the Financial Sector
There are two standard explanations of the cause of the 2007-09 crisis. The first is greed, greed that overtook the banks, then the mortgage brokers, then the rating agencies, then the bondholders, and then the borrowers. One can see these forces at work in the movie The Big Short. A second explanation is that a panic exploded in 2008 and 2009, causing a run on banks, on money markets, and on collateral. According to the second theory, the only way to stem the panic was to restore confidence… Expand
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