Academic

Financial Crisis Shorthand?

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

It's hardly easy to understand what exactly happened to get us into our dire straits, but one needs a working, 80-20 hypothesis.  I think mine would focus on insurance and leverage.  The former covers credit default swaps and the general tiny-risk-of-large-losses that came with other securitized products.  The later goes to what makes large losses catastrophic ones.  So, on this view, leveraged companies were selling misvalued insurance, to devastating effect. 

It's one way to look at it, anyway.  But other shorthands are welcome.

Meanwhile, this article on a left-vague-in-the-details volte-face right before the Geithner bailout was unveiled is pretty interesting.  Via Felix Salmon.

Full post as published by Conglomerate on February 17, 2009 (boomark / email).