Thursday, May 15, 2008

Note on Explaining the Credit Crisis

Yesterday, I gave a talk to the Salem Rotary Club about the credit crisis. I attempted in about 20 minutes to give a broad overview of the short history of the crisis. Doing so forced me to paint in fairly broad strokes and neglect a lot of detail, but I think the essence is correct.

The text below is a paraphrase of what I said as I did not speak from a script, I have also included my power point slides.

I have now arranged my posts to be consecutive so you can read them in order immediately following this post. I hope you find it useful and interesting.


Jeff said...

Very nice summary. One can also go back further in time to the Great Depression and revisit the regulations that arose back then in response to bank failures.

The pressure to get around the bank safeguard regulations has led to the "financial innovation" that was heralded not so long ago, but is now recognized to have resulted in the credit crisis.

I like the now-infamous 2003 picture of bankers clearing "Red Tape" with a chainsaw:

My question is: is anybody laying the groundwork such that this doesn't happen again in the future? (possibly worse, next time?) Or maybe people (investors) are just learning their lessons the hard way and we don't need new regulation?

ScottB said...

Agree, nice summary. While you had to start somewhere, global capital has a much longer history (Brits lost a bundle investing in U.S. railroads in the mid 1800's, as I recall), and I have read that on a percentage basis, global capital flows were larger in the 1880s-1890s.

You didn't want to show the stick-figure powerpoint ( to the Rotary?