Page 442 - untitled

CAUSES OF THE

FINANCIAL AND ECONOMIC CRISIS

CONTENTS
Introduction.......................................................................................................
How Our Approach Differs from Others’ ..........................................................
Stages of the Crisis..............................................................................................
The Ten Essential Causes of the Financial and Economic Crisis........................
The Credit Bubble: Global Capital Flows, Underpriced Risk,
and Federal Reserve Policy.................................................................................
The Housing Bubble ..........................................................................................
Turning Bad Mortgages into Toxic Financial Assets..........................................
Big Bank Bets and Why Banks Failed................................................................
Two Types of Systemic Failure............................................................................
The Shock and the Panic....................................................................................
The System Freezing ..........................................................................................

INTRODUCTION

We have identified ten causes that are essential to explaining the crisis. In this dis-
senting view:

• We explain how our approach differs from others’;
• We briefly describe the stages of the crisis;
• We list the ten essential causes of the crisis; and
• We walk through each cause in a bit more detail.

We find areas of agreement with the majority’s conclusions, but unfortunately the
areas of disagreement are significant enough that we dissent and present our views in
this report.
We wish to compliment the Commission staff for their investigative work. In
many ways it helped shape our thinking and conclusions.
Due to a length limitation recently imposed upon us by six members of the Com-
mission, this report focuses only on the causes essential to explaining the crisis. We

regret that the limitation means that several important topics that deserve a much
fuller discussion get only a brief mention here.
