I made the mistake of watching the Academy Awards on Monday. It was a mistake because I rarely go to movies and had no idea whom the people were and what movies they were honoring. The reason that I bring this up is to point out a misconception voiced by one of the people who won an award. He felt the need to point out that the economic meltdown in 2008 had been a financial meltdown brought about by nefarious CEOs of banks and the like. He pointed out that none of these people had been put in jail and that this was some monstrous injustice. I remember his point but cannot recall what category he got the award for. I think it might have had something to do with embellishment or dramatization.
I am not saying that banks and bankers are blameless but they were really bit players in this mess. I recently put up a link to a very thoughtful and well researched economic paper by Dr. Ross MkKitrick, Economics professor at the University of Guelph. If you are wondering what happened and who is to blame check out this link. It is fascinating. For those of you whose eyes glaze over at the mere mention of the topic of economics, go to page 28 and read who he pins the blame on and what we can do to prevent this from ever happening. Interestingly, he does not put any of the blame on the banks generally but rather singles out an insurance company, AIG, and their financial products group for 20% of the blame. He places the majority (50%) of the blame squarely on the shoulders of two administrations in the US; Clinton and Bush. This was not a failure of capitalism; it was social policy trumping economics. If you read it, this paper will help you know what happened so you can recognize bad social policy and understand the consequences.