What Caused The Global Financial Crisis according to Christopher Thornberg

The Global Financial Crisis according to Christopher Thornberg

Christopher Thornberg is the Founding Partner of Beacon Economics, LLC and has been credited with warning in advance of the housing crash by the LATimes and other sources. He has taught at several universities and prior to launching Beacon, he was an economist with UCLA’s Anderson Forecast. Since 2006, Dr. Thornberg has served on the advisory board of Wall Street hedge fund Paulson & Co. Inc.
1. Which FCIC View best represents the causes of the Financial Crisis?

Majority Conclusions

2. Which narrative presented by Douglas Elliott and Martin Baily of the Brookings Institute in Telling the Narrative of the Financial Crisis: Not Just a Housing Bubble best represents the causes of the Financial Crisis?

"Everyone" was at fault: Wall Street, the government, and our wider society. Everyone if I have to pick one, but in order I'd rank

Wall Street
Regulators
Ignorance of society

3. The Global Financial Crisis effectively ended in the year
2010 (the main crisis was over by then).

4. What were the primary causes of the Global Financial Crisis?
The crisis resulted from a combination of factors. Ultimately the biggest were a) the complete collapse of credit standards in the lending industry, which b) was hidden in the context of financial innovation, with the help of the credit reporting agencies (who said the products were golden), c) overleveraging of (mainly) the investment banks, and d) regulators were completely out to lunch (not doing their jobs).

5. What still should change as a result of the crisis?

Haven't effectively dealt with conflict of interest at the ratings agencies (they are still paid by the people they are rating).
Wall Street executives not held culpable (misplaced incentives).
Still need to create a regulatory system that actually regulates.
Still have to deal with Fannie and Freddie.
Some form of Volker rule should be put into place.

Compiled by Gary Karz, CFA
Host of InvestorHome

Global Financial Crisis Survey

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