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1. Three Narratives about the Financial Crisis

Author:
Peter J. Wallison
Publication Date:
09-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The most important lesson we can learn from the financial crisis is what caused it. Even though the Dodd-Frank Act (DFA) has been signed into law, this is still an important question. If we do not attribute the crisis to the right cause, we could well stumble into another crisis in the future; and if the DFA was directed at the wrong cause, we should consider its repeal. There are several competing narratives. One of them will eventually be accepted, and will determine how the great financial crisis of 2008 is interpreted, and thus how it affects public policy in the future.
Topic:
Financial Crisis

2. Government Housing Policy and the Financial Crisis

Author:
Peter J. Wallison
Publication Date:
06-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
It is popular around the world to blame the financial crisis on the United States. But before we identify this as the usual anti- Americanism, we should perhaps look more seriously at our country's housing policies. Unfortunately, there is a strong argument that the financial crisis is indeed the fault of the United States—an artifact of the housing policies that this country has followed since the early 1990s. These policies produced an unprecedented number of subprime and other nonprime mortgages (known as Alt-A), and when the housing bubble topped out in late 2006 and early 2007, these loans began to default at unprecedented rates. In my view, the severe losses associated with these defaults caused weakness of Bear Stearns and AIG—resulting in their rescue—the failure of Lehman Brothers, the severe recession we are experiencing in the United States today, and ultimately the financial crisis itself.
Topic:
Financial Crisis
Political Geography:
United States

3. Getting the Story Right: The True Origin of the Financial Crisis

Author:
John H. Makin, Vincent R. Reinhart, and Peter J. Wallison
Publication Date:
09-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
One year ago, on September 14, Lehman Brothers declared bankruptcy. The next day the Dow fell five hundred points. Soon thereafter, the government essentially nationalized AIG, made Goldman Sachs and Morgan Stanley into bank-holding companies, and petitioned Congress for aid. In early September, Fannie Mae and Freddie Mac had been placed in government conservatorship. These events followed the bursting of the housing bubble. We present here three essays written by AEI scholars in the spring and summer of 2009 on the origins of the financial crisis whose reverberations we continue to feel today. Vincent R. Reinhart sets the stage by reminding us of the importance of getting the story of what happened right, as policy recommendations flow from our understanding of what occurred. He also tells us that “the narrative first written about the Great Depression was wrong in many important respects.” John H. Makin and Peter J. Wallison focus on the misguided policies that contributed to the crisis. In a new Economic Outlook, Makin discusses three important lessons of the financial crisis that should be understood in order to enable a faster, more effective policy response to future crises.
Topic:
Economics, Markets, and Financial Crisis

4. The Wal-Bank Principle

Author:
Peter J. Wallison
Publication Date:
05-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
At the Federal Deposit Insurance Corporation's (FDIC) recent hearings on Wal-Mart's application to acquire a bank-like institution in Utah that can accept FDIC-insured deposits, a representative of the National Association of Realtors testified that such an acquisition would violate the principle separating banking and commerce. No doubt the banks savored this rare support from the realtors, but what they may not have realized is that the joke is on them.
Topic:
Civil Society, Economics, Government, and Politics

5. XBRL and U.S. Financial Market Leadership

Author:
Peter J. Wallison
Publication Date:
03-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In December, the London Stock Exchange celebrated a record year for foreign company new issues, with 129 new listings by companies from twenty-nine different countries. In contrast, the New York Stock Exchange registered a net gain of six foreign listings (a gain of nineteen and a loss of thirteen) in 2005, and NASDAQ gained a net of fourteen. According to a press report by the London Stock Exchange on its success, “about 38 per cent of the international companies surveyed said they had considered floating in the United States. Of those, 90 per cent said the onerous demands of the new Sarbanes-Oxley corporate governance law had made London listing more attractive.” By now, it is well-known what harm Sarbanes-Oxley has done to the attractiveness of the U.S. securities markets, but what is not well- known is that the lack of resources available to a relatively obscure accounting group—engaged in the development of a technical-sounding disclosure system called XBRL—may also threaten not only the current primacy of the U.S. financial markets, but also the future competitiveness of U.S. companies.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States, New York, and London

6. Addressing the Real Public Risk from Fannie Mae and Freddie Mac

Author:
Peter J. Wallison
Publication Date:
04-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Curtailing the ability of Fannie Mae and Freddie Mac to hold mortgages and mortgage-backed securities will lower the risks these two government-sponsored enterprises pose to taxpayers and the economy yet will not undermine whatever support they give to the residential housing market.
Topic:
International Relations, Foreign Policy, Democratization, and Economics

7. Let Stock Exchanges Compete without Price Regulation

Author:
Peter J. Wallison
Publication Date:
01-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The current proposal from the Securities and Exchange Commission for market structure reform would extend the "trade-through" rule to the Nasdaq market, but instead the rule should be eliminated altogether to promote competition and innovation.
Topic:
International Relations, Foreign Policy, Democratization, and Economics

8. Accounting Lags behind a Knowledge Economy

Author:
Peter J. Wallison
Publication Date:
03-2004
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Some financial analysts worry that high price-earnings ratios reflect unfounded optimism in corporate earnings potential and signal a return to the "bubble" market; however, conventional accounting methods used to determine the value of companies have not kept pace with changes in the U.S. economy and are therefore understating the value of America's most dynamic companies. High price-earnings ratios seem to indicate that investors are wise to that.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
United States and America

9. Blame Sarbanes-Oxley

Author:
Peter J. Wallison
Publication Date:
09-2003
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
An array of stimulus factors has failed to generate strong growth in the U.S. economy. That may largely be a consequence of the Sarbanes-Oxley Act and the stock exchange regulations it has spawned, which have altered the composition and dynamics of corporate boards in ways that discourage risk-taking.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
United States