Joseph stiglitz freefall pdf

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    'Freefall' ” continued from page 1 continued on page 3. Joseph E. Stiglitz (photo prv.) .. cy/wess/wespfiles/fortbazomecan.tk The In- ternational Labour. The article reviews the book "Freefall: America, Free Markets, and the Sinking of the World Economy," by Joseph E. Stiglitz. The Freefall That Isn't Free: A review of Freefall: America, Free Markets, and the Sinking of the Wo It's free markets for the rest of us. Among the many analyses of the Global Financial. Crisis, Joseph Stiglitz's Freefall is one of the most outstanding. It traces how the crisis occurred, despite urgent.

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    Joseph Stiglitz Freefall Pdf

    Freefall - Joseph E. Stiglitz - Ebook download as PDF File .pdf), Text File .txt) or read book online. Joseph E. Stiglitz was born in Gary, Indiana in A graduate of Amherst entitled, Freefall: America, Free Markets, and the Sinking of the World Economy. Freefall: America, Free Markets, and the Sinking of the World Economy [Joseph E . Stiglitz] on fortbazomecan.tk *FREE* shipping on qualifying offers. The New York.

    Share via Email Joseph Stiglitz continues to voice moral outrage over the global financial downturn. Everybody wants to get back to business as usual. Banks must recover their profitability and pay back taxpayers the money that was used to bail them out. Economic recovery must get under way. Economic theory, proprietory trading desks and economic faculties can resume theorising, trading and teaching as they did. The crash was all a bad dream. There must obviously be some technical improvements to regulation — notably increasing banks' capital and reducing their organisational opaqueness — but as Alistair Darling, the bankers' new best friend, helpfully told the annual meeting of the World Economic Forum at Davos, what banks need to do now is to get off the front pages. Let's close the chapter on the whole nightmare and get back to normality. In Britain it has been left to the top officials at the Bank of England and Adair Turner, chair of the Financial Services Authority, to continue to express the combination of moral outrage and close economic analysis that the events require — along with warning of the dire consequences of getting back to normal with minimal reform. Among the politicians, Vince Cable has kept up an honourable drumbeat of constructive criticism, and George Osborne, after disastrously misreading the crisis at the outset, has begun to signal some policy bravery — for example, welcoming Obama's recent move to back the Volcker plan, splitting off the banks' "casino" functions, such as speculating in derivatives, from the parts that accept deposits from the general public. So far, however, few of his welcomes have turned into hard policy. For the rest it has been cramping, uninspiring stuff, willing action only if others move first.

    Slow economic growth, rising inequality, financial instability, and environmental degradation are problems born of the market, and thus cannot and will not be overcome by the market on its own. Governments have a duty to limit and shape markets through environmental, health, occupational-safety, and other types of regulation. Markets still have a crucial role to play in facilitating social cooperation, but they serve this purpose only if they are governed by the rule of law and subject to democratic checks.

    Otherwise, individuals can get rich by exploiting others, extracting wealth through rent-seeking rather than creating wealth through genuine ingenuity. Progressive capitalism seeks to do precisely the opposite. By exploiting information advantages, buying up potential competitors, and creating entry barriers, dominant firms are able to engage in large-scale rent-seeking to the detriment of everyone else.

    Unless government takes a more active role than neoliberalism prescribes, these problems will likely become much worse, owing to advances in robotization and artificial intelligence. The fourth key item on the progressive agenda is to sever the link between economic power and political influence.

    Economic power and political influence are mutually reinforcing and self-perpetuating, especially where, as in the US, wealthy individuals and corporations may spend without limit in elections. This is not just a moral and political problem: economies with less inequality actually perform better.

    This book has a different aim. When President Ronald Reagan appointed Greenspan chairman of the Federal Reserve in , he was looking for someone committed to deregulation. Paul Volcker, who had been the Fed chairman previously, had earned high marks as a central banker for bringing the U. But Volcker understood the importance of regulations, and Reagan wanted someone who would work to strip them away.

    Had Greenspan not been available for the job, there were plenty of others able and willing to assume the deregulation mantel. The problem was not so much Greenspan as the deregulatory ideology that had taken hold. While this book is mostly about economic beliefs and how they affect policies, to see the link between the crisis and these beliefs, one has to unravel what happened.

    What policies and what events triggered the great downturn of ? Parsing out the relative role of bad behavior by the banks, failures of the regulators, or loose monetary policy by the Fed is not easy, but I will explain why I put the onus of responsibility on financial markets and institutions.

    Finding root causes is like peeling back an onion. Each explanation gives rise to further questions at a deeper level: perverse incentives may have encouraged shortsighted and risky behavior among bankers, but why did they have such perverse incentives?

    There is a ready answer: problems in corporate governance, the manner in which incentives and pay get determined. Natural selection is supposed to entail survival of the fittest; those firms with the governance and incentive structures best designed for long-run performance should have thrived. That theory is another casualty of this crisis. As one thinks about the problems this crisis revealed in the financial sector, it becomes obvious that they are more general and that there are similar ones in other arenas.

    What is also striking is that when one looks beneath the surface, beyond the new financial products, the subprime mortgages, and the collateralized debt instruments, this crisis appears so similar to many that have gone before it, both in the United States and abroad.

    There was a bubble, and it broke, bringing devastation in its wake. The bubble was supported by bad bank lending, using as collateral assets whose value had been inflated by the bubble. The new innovations had allowed the banks to hide much of their bad lending, to move it off their balance sheets, to increase their effective leverage—making the bubble all the greater, and the havoc that its bursting brought all the worse.

    New instruments credit default swaps , allegedly for managing risk but in reality as much designed for deceiving regulators, were so complex that they amplified risk.

    The big question, to which much of this book is addressed, is, How and why did we let this happen again, and on such a scale? While finding the deeper explanations is difficult, there are some simple explanations that can easily be rejected.

    As I mentioned, those who worked on Wall Street wanted to believe that individually they had done nothing wrong, and they wanted to believe that the system itself was fundamentally right.

    They believed they were the unfortunate victims of a once-in-a-thousand-year storm. But the crisis was not something that just happened to the financial markets; it was manmade—it was something that Wall Street did to itself and to the rest of our society.

    Or, the government should have stopped us from doing it; it was the fault of the regulators. There is something particularly unseemly about these attempts of the U. Believers in the system also trot out a third line of defense, the same one used a few years earlier at the time of the Enron and WorldCom scandals.

    But what went wrong—then and now —did not involve just a few people. Difficulties in interpretation In the policy realm, determining success or failure presents a challenge even more difficult than ascertaining to whom or to what to give credit and who or what to blame. But what is success or failure? To those in the region who saw their economies wrecked, their dreams destroyed, their companies bankrupted, and their countries saddled with billions in debt, the bailouts were a dismal failure.

    To the critics, the policies of the IMF and U. Treasury had made things worse. To their supporters, they had prevented disaster.

    And there is the rub. The questions are, What would things have been like if other policies had been pursued? Had the actions of the IMF and U. Treasury prolonged and deepened the downturn, or shortened it and made it shallower? To me, there is a clear answer: the high interest rates and cutbacks in expenditures that the IMF and Treasury pushed—just the opposite of the policies that the United States and Europe followed in the current crisis—made things worse.

    Similarly, many who observed the long expansion of the world economy during the era of deregulation concluded that unfettered markets worked —deregulation had enabled this high growth, which would be sustained. The reality was quite different. The growth was based on a mountain of debt; the foundations of this growth were shaky, to say the least. Western banks were repeatedly saved from the follies of their lending practices by bailouts—not just in Thailand, Korea, and Indonesia, but in Mexico, Brazil, Argentina, Russia…the list is almost endless.

    But it was government that repeatedly saved markets from their own mistakes. These debates over the effects of certain policies help to explain how bad ideas can persist for so long. To me, the Great Recession of seemed the inevitable consequence of policies that had been pursued over the preceding years.

    That those policies had been shaped by special interests—of the financial markets—is obvious. More complex is the role of economics. Among the long list of those to blame for the crisis, I would include the economics profession, for it provided the special interests with arguments about efficient and self-regulating markets—even though advances in economics during the preceding two decades had shown the limited conditions under which that theory held true.

    As a result of the crisis, economics both theory and policy will almost surely change as much as the economy, and in the penultimate chapter, I discuss some of these changes. I am often asked how the economics profession got it so wrong.

    But there was a small group of economists who not only were bearish but also shared a set of views about why the economy faced these inevitable problems. As we got together at various annual gatherings, such as the World Economic Forum in Davos every winter, we shared our diagnoses and tried to explain why the day of reckoning that we each saw so clearly coming had not yet arrived.

    We economists are good at identifying underlying forces; we are not good at predicting precise timing. At the meeting in Davos, I was in an uncomfortable position. I had predicted looming problems, with increasing forcefulness, during the preceding annual meetings. Yet, global economic expansion continued apace. The 7 percent global growth rate was almost unprecedented and was even bringing good news to Africa and Latin America. As I explained to the audience, this meant that either my underlying theories were wrong, or the crisis, when it hit, would be harder and longer than it otherwise would be.

    I obviously opted for the latter interpretation. THE CURRENT crisis has uncovered fundamental flaws in the capitalist system, or at least the peculiar version of capitalism that emerged in the latter part of the twentieth century in the United States sometimes called American-style capitalism. It is not just a matter of flawed individuals or specific mistakes, nor is it a matter of fixing a few minor problems or tweaking a few policies. It has been hard to see these flaws because we Americans wanted so much to believe in our economic system.

    The strength of our system allowed us to triumph over the weaknesses of theirs. We rooted for our team in all contests: the United States vs. Europe, the United States vs. When U. Was our system really better than Japan, Inc.? This anxiety was one reason why some took such comfort in the failure of East Asia, where so many countries had adopted aspects of the Japanese model. Numbers reinforced our self-deception. This is not the first time that judgments including the very fallible judgments of Wall Street have been shaped by a misguided reading of the numbers.

    Its growth statistics looked good for a few years. But like the United States, its growth was based on a pile of debt that supported unsustainable levels of consumption. Eventually, in December , the debts became overwhelming, and the economy collapsed. Once we are over our current travails—and every recession does come to an end—they look forward to a resumption of robust growth. But a closer look at the U.

    But the problems that have to be addressed are not just within the borders of the United States. The global trade imbalances that marked the world before the crisis will not go away by themselves. It is global demand that will determine global growth, and it will be difficult for the United States to have a robust recovery—rather than slipping into a Japanese-style malaise—unless the world economy is strong.

    And it may be difficult to have a strong global economy so long as part of the world continues to produce far more than it consumes, and another part—a part which should be saving to meet the needs of its aging population —continues to consume far more than it produces. WHEN I began writing this book, there was a spirit of hope: the new president, Barack Obama, would right the flawed policies of the Bush administration, and we would make progress not only in the immediate recovery but also in addressing longer-run challenges.

    Writing this book has been painful: my hopes have only partially been fulfilled. Of course, we should celebrate the fact that we have been pulled back from the brink of disaster that so many felt in the fall of But some of the giveaways to the banks were as bad as any under President Bush; the help to homeowners was less than I would have expected.

    The financial system that is emerging is less competitive, with too-big-to-fail banks presenting an even greater problem. Money that could have been spent restructuring the economy and creating new, dynamic enterprises has been given away to save old, failed firms.

    But it would be wrong to have criticized Bush for certain policies and not raise my voice when those same policies are carried on by his successor. Writing this book has been hard for another reason. I criticize—some might say, vilify—the banks and the bankers and others in the financial market. I have many, many friends in that sector—intelligent, dedicated men and women, good citizens who think carefully about how to contribute to a society that has rewarded them so amply.

    They not only give generously but also work hard for the causes they believe in. Indeed, many of those in the sector feel that they are as much victims as those outside. They have lost much of their life savings. Within the sector, most of the economists who tried to forecast where the economy was going, the dealmakers who tried to make our corporate sector more efficient, and the analysts who tried to use the most sophisticated techniques possible to predict profitability and to ensure that investors get the highest return possible were not engaged in the malpractices that have earned finance such a bad reputation.

    But this crisis was the result of actions, decisions, and arguments by those in the financial sector. It was created. We had just built a few too many houses.

    The policies showed a lack of understanding of the fundamentals of modern macroeconomics. As one thinks about the problems this crisis revealed in the financial sector. How did the largest economy in the world go into freefall? What policies and what events triggered the great downturn of ? Long-standing views about economics.

    In recent years. Finding root causes is like peeling back an onion. The failure ten years ago was also partly a failure of global politics. In There was a bubble. Natural selection is supposed to entail survival of the fittest. For the most part. How and why did we let this happen again.

    Others will write and in fact have already written books that point fingers at this policymaker or another. Paul Volcker. What is also striking is that when one looks beneath the surface. New instruments credit default swaps.

    After Neoliberalism by Joseph E. Stiglitz - Project Syndicate

    Had Greenspan not been available for the job. It was impossible to discern the principles behind their decision making. The new innovations had allowed the banks to hide much of their bad lending. Freefall When the world economy went into freefall in To me. Its view is that essentially all the critical policies.

    To mention but one. Parsing out the relative role of bad behavior by the banks. I was less impressed than Time magazine or Bob Woodward. But Volcker understood the importance of regulations. Time magazine on February They were wrong. Larry Summers. There was. The big question. Each explanation gives rise to further questions at a deeper level: Most economists instinctively replied.

    The problem was not so much Greenspan as the deregulatory ideology that had taken hold. In the aftermath of the last great financial crisis. This book has a different aim. That theory is another casualty of this crisis. As the clouds of recession began to loom over the U. Flawed policies had not only brought on the East Asian crisis of a decade ago but also exacerbated its depth and duration and left a legacy of weakened economies and mountains of debt.

    The crisis struck in the developing countries. Incorrect economic theories not surprisingly lead to incorrect policies. While this book is mostly about economic beliefs and how they affect policies. After all. I was in an uncomfortable position. But there was a small group of economists who not only were bearish but also shared a set of views about why the economy faced these inevitable problems. This is not the first time that judgments including the very fallible judgments of Wall Street have been shaped by a misguided reading of the numbers.

    Treasury prolonged and deepened the downturn. While finding the deeper explanations is difficult. But it was government that repeatedly saved markets from their own mistakes. I would include the economics profession. It is not just a matter of flawed individuals or specific mistakes. The 7 percent global growth rate was almost unprecedented and was even bringing good news to Africa and Latin America.

    There is something particularly unseemly about these attempts of the U. Numbers reinforced our self-deception. But what is success or failure? To observers in the United States and Europe.

    Western banks were repeatedly saved from the follies of their lending practices by bailouts—not just in Thailand. They believed they were the unfortunate victims of a once-in-a-thousand-year storm. I am often asked how the economics profession got it so wrong.

    As a result of the crisis. What would things have been like if other policies had been pursued? Had the actions of the IMF and U. To those in the region who saw their economies wrecked. The growth was based on a mountain of debt.

    This anxiety was one reason why some took such comfort in the failure of East Asia. To their supporters. And there is the rub. The strength of our system allowed us to triumph over the weaknesses of theirs. I obviously opted for the latter interpretation. I discuss some of these changes. In the s. When U. Treasury had made things worse.

    Difficulties in interpretation In the policy realm. It has been hard to see these flaws because we Americans wanted so much to believe in our economic system. As I explained to the audience. Russia…the list is almost endless. These debates over the effects of certain policies help to explain how bad ideas can persist for so long. Was our system really better than Japan. Every system has its rotten apples. Wall Street advocates have others: The government made us do it.

    The questions are. More complex is the role of economics. As I mentioned. At the meeting in Davos. As we got together at various annual gatherings. Believers in the system also trot out a third line of defense. We rooted for our team in all contests: Its growth. The reality was quite different. Among the long list of those to blame for the crisis. We economists are good at identifying underlying forces. But what went wrong—then and now —did not involve just a few people.

    That those policies had been shaped by special interests—of the financial markets—is obvious. To the critics. Those who had concluded that all was well with the market economy had made the wrong inference. I had predicted looming problems. But the crisis was not something that just happened to the financial markets. Barack Obama.

    In a globalized economy. The world. Writing this book has been painful: I criticize—some might say. IF WE can understand what brought about the crisis of and why some of the initial policy responses failed so badly. The ingenuity of man knows no bounds.

    The financial system that is emerging is less competitive. They would not recognize the caricatures that I depict here. But some of the giveaways to the banks were as bad as any under President Bush. Writing this book has been hard for another reason.

    But a closer look at the U. But this crisis was the result of actions. But like the United States. The global trade imbalances that marked the world before the crisis will not go away by themselves. This book is written in the hope that we can do so again. Money that could have been spent restructuring the economy and creating new.

    They have lost much of their life savings. Within the sector. We may even be able to pave the way for robust growth based on solid foundations. But the problems that have to be addressed are not just within the borders of the United States. I have many. Those who played a role in creating the system and in managing it—including those who were so well rewarded by it—must be held accountable. They not only give generously but also work hard for the causes they believe in.

    But it would be wrong to have criticized Bush for certain policies and not raise my voice when those same policies are carried on by his successor. It is global demand that will determine global growth.

    And it may be difficult to have a strong global economy so long as part of the world continues to produce far more than it consumes. Of course. But in the aftermath of the Great Depression. WHEN I began writing this book.

    Once we are over our current travails—and every recession does come to an end—they look forward to a resumption of robust growth.

    Memories are short. It was created. As seems to happen so often in our modern complex society. Jason Furman. I am indebted to Michael Greenberger.

    Once again. Nouriel Roubini. Norton and Penguin: Detailed comments and editing from Brendan Curry. I intend no offense to others. And while this book is critical of some of the approaches of the Obama administration. Sheri Prasso. In the years prior to the crisis. Martin Wolf.

    Paul Krugman. Long days were spent discussing the global economic crisis and what should be done about it with the members of the Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System. Richard Parker and Kenneth Rogoff of Harvard. July In singling out a few.

    In the production of this book I have been particularly fortunate benefitting from the assistance of a first-rate team of research assistants —Jonathan Dingel. Andrew Crockett and Bill White. David Wessel. Austan Goolsbee. Joe Nocera. Izzet Yildiz. To mention a few others who have helped shape my views: Andrew Sheng.

    Leif Pagrotsky. I also want to thank Dominique Strauss-Kahn. Jose Antonio Ocampo. Elizabeth Warren and David Kennedy. Jamie Galbraith of the University of Texas. Sebastian Rondeau. Stephany Griffith-Jones. I have particularly benefitted from the writings and.

    The list of those to whom I am indebted would fill a book of this size.

    While I am critical of Congress. I have been lucky to work with W. Howard Davies. Gillian Tett. Securities and Exchange Commission.

    Mary Babcock did a superb job of copyediting under an extraordinarily tight deadline. I was also in the fortunate position of not only seeing firsthand how it was affecting countries in every continent but also discussing the impacts with the presidents. Thousands of conversations with hundreds of people in countries all over the world helped shape my views and my understanding of what has gone on.

    Robert Shiller. Luigi Zingales of the University of Chicago. Mar Gudmundsson. Perry Merhing.

    Drake McFeely. October South Africa. I have been writing on the subject of financial regulation since the savings and loan debacle in the United States in the late s. Gerry Caprio now at Williams College. Floyd Norris. David Smith. Cullen Murphy. Damon Silver. Thomas Hellmann. Patrick Bolton.

    George Soros. Kevin Murdock. Deidre Sheehan. Luckily there are some excellent. Two individuals should be singled out for their influence in shaping my views on the subject at hand: Rob Johnson. Whatever legislation is passed will bear the stamp of Congressman Barney Frank.

    Gretchen Morgenson. And Bruce Greenwald. I owe my biggest debt to Anya Schiffrin. Ngaire Woods of Oxford.

    Freefall - Joseph E. Stiglitz

    Marilou Uy. Earlier versions of portions of this book have appeared in Vanity Fair. Jill Blackford not only oversaw the whole process but also made invaluable contributions at every stage. This book would not be possible without her. Robert Skidelsky of the University of Warwick. Arthur Levitt. I am indebted to their economic team including Timothy Geithner. And there was the collapse of American manufacturing. We liked to think of our country as one of the engines of global economic growth.

    I begin with the bursting of the tech or dot-com bubble in the spring of —a bubble that Alan Greenspan. When the bubble popped. Add in the U. And borrow they did. As housing prices soared. But all of this borrowing was predicated on the risky assumption that housing prices would continue to go up. A deregulated market awash in liquidity and low interest rates. Americans had. The burden on monetary policy was increased when oil prices started to soar after the invasion of Iraq in For purposes of brevity.

    Both they and their lenders could feel good about what was happening: Much of investment had been in the high-tech sector.

    The breaking of the bubble at first affected the worst mortgages the subprime mortgages. Something went wrong—badly wrong. Global credit markets began to melt down. The economy was out of kilter: Low interest rates and lax regulations fed the housing bubble. The United States had a housing bubble. As they lost their homes. In March There was an inventory cycle—as credit markets froze and demand fell.

    There is no natural point to cut into the seamless web of history. How did it all happen? This is not the way market economies are supposed to work. In other words. Bush used the short recession following the collapse of the tech bubble as an excuse to push its agenda of tax cuts for the rich.

    The administration of President George W. America went into a recession. The trust and confidence that underlie the banking system evaporated. Worse still. There were also deeper questions: What would replace the unbridled consumption of Americans that had sustained the economy in the years before the bubble broke?

    How were America and Europe going to manage their restructuring. They worked—but only by replacing the tech bubble with a housing bubble. The global economy needed ever-increasing consumption to grow. For a few observers. That put the burden of restoring the economy to full employment on monetary policy.

    Banks refused to lend to each other —or demanded high interest rates to compensate for bearing the risk. Average savings rates fell to zero—and with many rich Americans saving substantial amounts. With so much excess capacity in the economy. The last time the United States had exported a major crisis was during the Great Depression of the s. This complexity. The tax cuts were.

    Restructuring was inevitable—globalization and the pace of technology demanded it—but it would not be easy. Demand fell. At that point. The United States spent hundreds. America and the world were faced with both a financial crisis and an economic crisis.

    When that bubble broke and housing prices fell from their stratospheric levels. And while previous crises had been contained. The richest country in the world was living beyond its means.

    Greenspan lowered interest rates. The economic crisis had several components: There was an unfolding residential real estate crisis. They could have. They argue. And the rating agencies blessed what the banks had done. In the long list of culprits. They were wrong on both counts. Homeowners also want monthly payments that are predictable. The failings in the mortgage market were symptomatic of the broader failings throughout the financial system.

    This is related to the first core function. Wall Street did not come up with a good mortgage product. It was this involvement in mortgage securitization that proved lethal. The U. Greenspan aggravated the situation by allowing banks to engage in ever-riskier lending and encouraging people to take out variable-rate mortgages.

    The second core function is assessing and managing risk and making loans. We have to be wary of too facile explanations: With the global budgetary and real costs of this crisis mounting into the trillions of dollars. In some cases. Mortgage companies had pushed exotic mortgages on to millions of people. Knowing who. Bankers acted greedily because they had incentives and opportunities to do so. That may be true. The first is providing an efficient payments mechanism. And risky assets that normally would have required substantially higher returns to induce people to hold them were yielding only a small risk premium.

    The United States spent hundreds of billions of dollars importing oil—money that otherwise would have gone to support the U. The rating agencies. The lure of easy profits from transaction costs distracted many big banks from their core functions. Modern alchemy entailed the transformation of risky subprime mortgages into AAA-rated products safe enough to be held by pension funds. The banks bought the mortgages and repackaged them.

    Wall Street firms. Had the designers of these mortgages focused on the ends—what we actually wanted from our mortgage market—rather than on how to maximize their revenues. The banking system in the United States and many other countries did not focus on lending to small-and medium-sized businesses. If a bank does its job well. In the Middle Ages. Perhaps worse. They had created new products which. At their peak in the years before the crisis. But the mortgage companies could not have done their mischief without being aided and abetted by the banks and rating agencies.

    A good mortgage product would have low transaction costs and low interest rates and would have helped people manage the risk of homeownership. But they chose not to do so. No wonder then that it is impossible to trace any sustained increase in economic growth beyond the bubble.

    In short. They created products that were so complex they had the effect of both increasing risk and information asymmetries. There are two core functions of the banking system.

    In all these go-go years of cheap money. The president may have given some speeches about the ownership society. Government wanted to increase household ownership. This litany of defenses is. The answers to these questions are complex but include a flawed system of corporate governance. By the same token. But this misses the essential point: The reason why banks are regulated is that their failure can cause massive harm to the rest of the economy.

    The same might have been true even if rating agencies had done as poor a job as they did. Greenspan and others. At the same time. Had they not bought them. The regulation did not cause the banks to behave badly. Had the low-cost funds been used well. In later chapters I will give a simple explanation: But more importantly. Their executives thought. But then we must push back again: Why were there flawed incentives?

    Joseph E. Stiglitz - Freefall America: Free Markets, And The Sinking Of The World Economy

    A policy has to be accompanied by carrots and sticks. There was no point of putting someone in a home for a few months and then tossing him out after having stripped him of his life savings. Freddie Mac and Fannie Mae were not making loans—without any incentives from the government. Had it not been for these efforts at lending to the poor.

    They blame the government for not having stopped them—like the kid caught stealing from the candy store who blamed the storeowner or the cop for looking the other way. But it is a remarkable claim: Lax regulation without cheap money might not have led to a bubble.

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