Every Monday morning at around 7:00 a.m. a new Econtalk podcast is made available. I plan my Monday mornings to ensure that I have an hour to listen.
Econtalk, produced by Russ Roberts, an economics professor at George Mason University with an affiliation to Stanford’s Hoover Institute, has won “Best Podcast” awards multiple times. He does a great job interviewing people. He is respectful, doesn’t get into shouting matches, and recognizes and explores that our biases affect how we see an issue.
This week Russ talks to Joe Nocera, author of All the Devils are Here, a book about the origins of the global financial crisis. Joe and his co-author did some fantastic reporting to get inside accounts of what was going on within the large financial institutions.
Among the highlights of the show for me:
- Fannie and Freddie used their power to bully the banks to adopt dangerous lending policies
- That the crisis was fueled both by the regulators and the capitalists
- That the origins of the crisis go back 20 years, to earlier bailouts
- That Bear Stearns was not too big to fail, and had it been let to fail others would have gotten their house in order much earlier than September 2008, when Lehman failed.
- That smart people believe too much in their smartness and become blinded to alternative possibilities – the risk modelers had the financial crisis in their models, but could not bring themselves to believe it could ever happen so firms didn’t protect themselves against this eventuality.
Mark Twain said “History doesn’t repeat itself, but it sure does rhyme.”
To the benefit of us all, Russ has done much to explore the question on the origins of the financial crisis and we would do well to know it. You can find a webliography of his work on this question here and here.