Banks Counted on Looting America%u2019s Coffers

Sixteen years ago, two economists published a research paper with a delightfully simple title: %u201CLooting.%u201D The economists were George Akerlof, who would later win a Nobel Prize, and Paul Romer, the renowned expert on economic growth. In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking... [more]

Sixteen years ago, two economists published a research paper with a delightfully simple title: %u201CLooting.%u201D The economists were George Akerlof, who would later win a Nobel Prize, and Paul Romer, the renowned expert on economic growth. In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking advantage of the government. The investors had borrowed huge amounts of money, made big profits when times were good and then left the government holding the bag for their eventual (and predictable) losses. The investors %u201Cacted as if future losses were somebody else%u2019s problem,%u201D the economists wrote. %u201CThey were right.%u201D http://www.nytimes.com/2009/03/11/business/economy/11leonhardt.html?ref=business Hmmm. Sounds like Dick Fuld. One more reason Wall Street is never coming back like we knew it. Fortunately, that will have no effect on Manhattan real estate, which only ever goes up in value. [less]