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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

September 13, 2013 at 10:27 AM

Vote: Is the financial system fixed?

Five years ago this weekend, the giant investment bank Lehman Brothers collapsed, ushering in a financial crisis and economic contraction the likes of which hadn’t been seen since the Great Depression. Less than two weeks later, but before regulators decided to back every big financial institution, Seattle’s Washington Mutual was allowed to become the biggest bank failure in American history. Some would say it was pushed, but that’s another story.

Most of the causes of the catastrophe are well-known: Deregulation, “innovations” such as exotic derivatives, shadow banking, securitization of massive numbers of subprime loans, high executive compensation rewarding excessive risk-taking, too much leverage, regulators captured by the industry and a massive bubble enabled by the Federal Reserve. The costs went well beyond those to the financial system. A Federal Reserve Bank of Dallas report estimates that the Panic of 2008 and resulting downturn cost each household between $50,000 and $120,000. Unemployment remains high. Inequality is worse. Beyond the money, trust in institutions and the equal application of the rule of law has been shredded.

In its typical inviting way, Ezra Klein’s Wonkblog offers 13 charts showing what’s fixed and what isn’t five years later. On the Atlantic’s site, James Kwak argues that policymakers have learned little if nothing from the crash. So it’s time for your say:

Read on for some of the best business and economic stories of the week and the haiku…

This Week’s Links:

Improving the reputation of farmed salmon | Salon

How the ‘failure’ culture of startups is killing innovation | Wired

Made in America: Inside the Moto X factory | Verge

Apple is no longer an innovative company, says the man who helped Jobs design the Mac | Quartz

IPO confidential: Twitter won’t be disclosing much | Slate

Unions and the technology challenge to good jobs | Next New Deal

How much will the defense industry make off a missile strike on Syria? | Vice

Foreign exchange markets: Now $5 trillion a day | Tim Taylor

Government policy, not the market, gave us inequality | Dean Baker

Today’s Econ Haiku:

Low on the radar

High risk of debt-ceiling fight

Whose default is that?

0 Comments | More in Banking, Federal Reserve, Great Recession | Topics: banking, Great Recession

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