Myths of the Credit Crisis

Arnold Kling has a good article looking at some myths of the financial crisis. One that he tackles is the idea that there was too little regulation. Instead, Kling asserts that regulation was one of the problems.

The myth is that the regulators failed to focus on the systemic implications of financial innovation. The reality is that the regulators were keenly interested in systemic risk. However, like their counterparts in the financial industry, the regulators thought that the innovations had reduced systemic risk. The problem was not that regulators lacked a mandate to address systemic risk. What they lacked was judgment and insight.

Posted by Eddy Elfenbein on September 9th, 2009 at 2:02 pm

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