The Global Financial Crisis according to Les Leopold

Global Financial Crisis Survey

Les Leopold is the author The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It. More background on Leopold and his commentary can be found at HuffingtonPost and Leopold's Blog.

1. Which FCIC View best represents the causes of the Financial Crisis?

None of the three views.

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?

None of these narratives.

3. I believe the crisis is ongoing and I project the Global Financial Crisis will end in the year

2013 or beyond.

4. What were the primary causes of the Global Financial Crisis?

The crisis was caused by a combination of financial deregulation and too much money in the hands of the few (due to dramatic changes in the tax code). An unfettered Wall Street created a wide variety of new financial instruments to suck up this excess capital. Much of it turned out to be enormously risky and ultimately turned into toxic assets. A key element was the ability to build a massive set of new securities upon sub-prime loans which in turn pumped up a housing bubble. When housing prices leveled off, the assets based upon them collapsed. The financial markets froze and a crash ensued. The same two conditions -- financial deregulation and excessive money in the hands of the few -- also were key factors in the 1929 crash.

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

Wall Street must be re-shackled so that it becomes a much less profitable and much more boring place to work -- much as it was from the 1930s through the 1960s. Also, taxes on the super-rich much rise dramatically to reallocate the capital that fuels Wall Street gambling. A significant financial transaction tax also is needed to re-balance the economy. Money must be moved away from the financial sector and into the real economy. Re-instituting Glass Steagall and busting up the big banks would help as well. While we're at it, we should get rid of the carried interest tax break for investment partnerships and tightly regulate hedge funds.

Compiled by Gary Karz, CFA
Host of InvestorHome

Global Financial Crisis Survey

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