David Brooks: Good summarization of all the literature on financial collapse.

It is odd to me that so many people are looking for some kind of abnormality which "caused" the crisis. Capitalism has had cyclical crises since its inception 300 years ago, so I would say that the crisis was not "caused" by either greed or stupidity, but is a naturally emergent behavior of the capitalist system.<p>Actually it is even more general than that. The pattern of exponential growth followed by die-off is common throughout nature - algal blooms, for example.<p>It seems that the whole discussion over the financial crisis has been warped and twisted by this absurd belief, in the face of all evidence, that the economy is in some sense "rational," that it has some kind of steady-state equilibrium, and that its problems are therefore caused by too little or too much regulation, too little or too much greed, etc.

I read it and wondered why stupidity vs. greed were presented as exclusive alternatives. They could both be true -- there was a lot of clubby legislation to benefit the financial community, <i>and</i> the models were wrong.

Any explanation that ignores the central role that Fannie Mae and Freddie Mac played in the crisis leaves a lot to be desired - and can hardly be considered a "good summary" of the financial collapse essentially since they were taken over quite early on in the crisis.<p>Can we also blame traders and financiers for mispricing risk? Definitely - but let's also be clear that government influence through GSE's like Fannie Mae and Freddie Mac, and poor government regulation played a central role in this. Further, as for leverage, high corporate taxes give companies large incentives to borrow to fund growth. What about the role the Fed played in keeping interest rates low and the credit bubble going? Sorry, I really can't see how this summary can be considered even remotely "good".

David Brooks is one of my favourite columnists and I still wont sign up for an account to read his writing. Call me stubborn if you'd like :-p.