Lessons from the Financial Crisis
By John H. Cochrane
Regulation Winter 2009-2010
With the benefit of a year’s hindsight, we can now look on the financial crisis and determine what was really the central problem, as well as identify what are the most important policy changes needed to avoid repeating the crisis. In my view, the usual suspects — “global imbalances” of saving or imports and exports, the Fed’s low rates, a housing “bubble,” subprime mortgages, fancy derivatives — are not that important. Once we put all that aside, I think we can focus on the real problems and their solution.