EPCI (Economie politique du changement institutionnel) Seminar

Du 09/11/2018 de 11:00 à 12:30

Salle S2/ MSE-Paris 106-112 Bd de l'Hôpital 75013 Paris

DAUMAL Marie (LED Université Paris 8)

The Economic and Political Causes of the 2008 US.Financial Crisis.

In 2008, the financial system of the United States teetered on the brink of collapse. Major banks failed or would have failed had it not been for financial support from the U.S. government. Subsequently, the financial crisis had a negative impact on the real economy, causing unemployment and poverty. A vast literature composed of official reports, books, and academic papers cites multiple reasons why it occurred: inappropriate deregulation, weak supervision, excessive risk and leverage, growing inequality, etc. Reviewing recent research and the report by the Financial Crisis Inquiry Commission, my purpose is to list and to synthesize the most commonly cited major causes. In a first part, this paper gives a short overview of the economic causes of the U.S. financial crisis. The second part deals with the political causes of the financial crisis. Indeed, since the 1980s, there was a remarkable bipartisan consensus in Washington in favor of deregulation, which, in turn, led to the financial crisis. I provide a few hypotheses and qualitative data to explain this consensus. Ideology, campaign contributions by private firms, lobbying, and the system of revolving doors between Wall Street and Washington might explain the past and current political decisions in favor of deregulation. One finding of this paper is that the financial crisis was due to inappropriate deregulation, which might have been the result of flaws in the political system of the United States.

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