Paul L. Caron

Wednesday, October 1, 2008

Seto: The Financial Crisis: What Went Wrong?

Theodore P. Seto (Loyola-L.A.) has posted The Financial Crisis: What Went Wrong?:

The ongoing turmoil in the financial markets has diverted me from my usual tax academic pursuits, including this blog, for which I apologize. This post explores the causes of that turmoil. My next post will explore solutions currently under consideration, including aspects of the so-called “$700 billion bailout.”

The current financial crisis has many causes, some long-term and structural. I focus here, however, on three immediate aspects of the crisis: the trigger, how problems generated by that trigger spread through the markets, and how this produced the liquidity freeze that persuaded Mr. Paulson and Mr. Bush to act (unsuccessfully thus far).

Larry Solum (Illinois) calls the piece "the most cogent short explanation of the current financial crisis of which I am aware ... -- brilliant and illuminating."

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I'l like McCain & Obama to answer the following question:
It’s clear that congress is responsible for this economic catastrophe; after all, congress defines the rules of the "game". I think there are far more investment "vehicles" than need be for purposes of a well working market. Unless the creation of new securities are regulated and limited; we will continue to see market meltdowns as the unscrupulous enrich themselves by creating one after another market Ponzi scheme! Are you in favor of a federal clearing house for security “vehicles”, which will reject the creation of questionable schemes?

Posted by: Garry | Oct 6, 2008 3:24:15 PM