Talk:Crash of 2008

Potentially useful article

This article, if written really well so that it is comprehensive yet comprehensible to the educated layman, could create a big boost for CZ. Martin Baldwin-Edwards 10:15, 30 September 2008 (CDT)

That is the combination that I am attempting, but I am finding it difficult.

It has ocuurred to me that it would be more manageable if it embodied a rather broad account of the subprime crisis, leaving the detail for a separate article. It would be a great help if someone could tackle that article. - Nick Gardner 11:51, 30 September 2008 (CDT)

A good deal of further evidence bearing on the latter paragraphs of this article is likely to become available in the course of the next three months, so I suggest that their present content be regarded as no more than a stopgap. But I do need comments on the remainder, particularly as regards its clarity. Nick Gardner 10:19, 4 October 2008 (CDT)

To my mind, this is looking really good. I find no problems with clarity, but we need some non-economists to express judgement on that.Martin Baldwin-Edwards 06:13, 5 October 2008 (CDT)

article title and redirects

I don't think the article's title is particularly intuitive, but I won't suggest changing it. I'm too lazy to do it myself, but I think that a *ton* of redirects should be created, for instance "Financial crisis" FC of 2008, 2008 Credit crisis, CC of 2008, etc. etc. Hayford Peirce 11:54, 5 October 2008 (CDT)

Yes, the title is the least good thing about this article! Probably it would be better as Financial crisis of 2008, for popular consumption (the public was completely unaware of it before 2008). Anyway, I leave the choice of title to its main author. Moving these things is a big pain, too :-( Martin Baldwin-Edwards 12:39, 5 October 2008 (CDT)

It was a temporary expedient, and I agree that it will have to be changed, but I would suggest that it is too soon to do so. I am not confident that the measures so far proposed will put an end to the crisis, so I think we should at least wait until it is clear whether it is going to spill over into 2009. In the meantime redirects as suggested by Hayford seem a good idea. Any volunteers? - Nick Gardner 15:39, 5 October 2008 (CDT)

I think that if the title had 2008 in it somewhere that would suffice to lead people to it no matter how many years it lasts or when it started. Sort of like "Crash of '29" could easily be stretched to account for the next 10 years. But, of course, there's no sense in making a lot of redirects right now unless we know what the final title is. (Although I *guess* redirects are *supposed* to be changed when articles are Moved....) Hayford Peirce 17:00, 5 October 2008 (CDT).

I have been waiting for a colloquial term for the crisis to emerge. I think it now has. I should like to change the title to "Crash of 2008". If that is agreed, I should be grateful if someone could attend to the mechanics of the change. (I propose also to set up and develop a matching "Crash of 1929" page). Nick Gardner 08:49, 12 October 2008 (UTC)

Thanks to whoever it was. The change is now done. Nick Gardner 09:53, 12 October 2008 (UTC)

Done (with some effort!). Martin Baldwin-Edwards 10:05, 12 October 2008 (UTC)

The scope of the article

I think the article as it stands "fills in all the boxes" but needs some immediate tidying-up followed by possibly a great deal of updating. I should be grateful for help with all of that, but what I need most of all is advice on the scope of the article. There is an immense amount of information available which I have not included for fear of overburdening our readers. Should I have gone into more detail or should I have left out more of it? Nick Gardner 11:24, 6 October 2008 (CDT)

If you'll forgive me, I felt that it not fleshed out. It might be that you're presuming knowledge and therefore giving a sketch of the crisis, assuming that our brains can fill in the blanks. Mine can't. If you had to totally explain to a teenager what was happening, what would you say? So I think my answer to your question is that it needs more, but more simply stated. Maybe a tutorial is needed here. Aleta Curry 21:30, 6 October 2008 (CDT)

Many thanks Aleta. I have shifted the definitions to the glossary subpage that you set up (I had no idea that there could be such a thing as a glossary subpage. How can one find out about such things?) I will try to do some fleshing out as soon as I can spare the time - which is mostly absorbed in trying to keep with developments. I have done what I can with the Related Articles subpage, but the article has a meagre parentage and only two offsprings. I should explain that I have no background in modern financial matters, and those that have have so far been silent. Until I started on this article, the subject was probably as confusing to me as it is to you. I am afraid there is little prospect of a tutorials subpage unless a modern financial economist comes forward Nick Gardner 03:06, 7 October 2008 (CDT)

afterthought: some examples of statements that you find obscure would be most helpful. Nick Gardner 03:43, 7 October 2008 (CDT)

if you want my advice as a "non-expert" and apparently you do....

The first thing I'd do would be to scrap the introductory paragraph 100%. No one in a general audience is going to read beyond the first 15 words or so. This sort of lede may be fine for the academic world but outside of that it's not going to fly.

I'm a writer: you don't *tell* the readers what you're going to write -- you go ahead and write it!

When the first paragraph disappears, I'll actually start reading the article and maybe offer some more (quite possibly unwanted advice).... Hayford Peirce 20:18, 6 October 2008 (CDT)

Okay, Hayford, you're right, but guess which one of the seven dwarves you're reminding me of? (and why is this blithering thing telling me that 'dwarves' is wrong? Isn't dwarves the plural of dwarf?) So, anyway, Nick, I chopped out the first bit and started my own outline. I don't expect that to stand, I'm just trying to sketch out some of the things I think are needed. Hope I'm being helpful. Aleta Curry 21:35, 6 October 2008 (CDT)

I forgot this bit: I think you need to move the Glossary to its own separate subpage. Related articles is pretty vital here and I think you need to show the relationship between parent topics, related topics and subtopics on it. Aleta Curry 21:46, 6 October 2008 (CDT)

Actually, they are "dwarfs" :-) Anyway, I think it is good that we have some collaboration on important articles -- and if there are any inaccuracies resulting from non-expert changes, some expert can correct these. We really do need to make this article accessible to as many people as possible. Martin Baldwin-Edwards 22:04, 6 October 2008 (CDT)

I went and looked it up and it's 'dwarfs' or 'dwarves'. I'm not mad, after all. Aleta Curry 23:57, 6 October 2008 (CDT)

Why are we having dwarves in an economic article? What happened to the Gnomes of Zurich? Howard C. Berkowitz 00:04, 7 October 2008 (CDT)

Do you mean the "Dwarfs of Canberra", Howard? The Gnomes are all bankrupt, now. Martin Baldwin-Edwards 05:09, 7 October 2008 (CDT)

Ugh! Am I ever gonna live this one down? Aleta Curry 21:59, 7 October 2008 (CDT)

Well, let's see, Aleta. It couldn't possibly be Grouchy, because that is totally alien to my personality. Dopey is possible, I suppose, but in that case I probably wouldn't be here at CZ in the first place. Sleepy? That's sure true a lot of the time! I forget the other four, but was one of them called "He Who Drinks Too Many Martinis and/or Other Spirituous Liquors While On-line"? Hayford Peirce 22:13, 6 October 2008 (CDT)

Yeah--don't you remember "Tipsy"??? hahahahahahahahahahahahaha And by the way, it was Grumpy Oh, what the hey--in deference to your drink-mixing abilities, I'll just call you "Doc"! Aleta Curry 23:57, 6 October 2008 (CDT)

Thank you all for your help. In response I have abbreviated the opening statement and removed the background paragraph, and I am working on a brief definitional statement under the heading of "the crisis". Unfortunately the timeline also demands attention, so it may be delayed. Nick Gardner 02:44, 7 October 2008 (CDT)

I have just finished the first round of the planned tidying-up of the text. I am now hoping for specific examples of lack of clarity from our "educated laymen", and specific examples of excessive glibness from our "finance nerds". Nick Gardner 06:46, 7 October 2008 (CDT)

Hayford - Not that it matters - and I do not wish to give offence by altering your alterations - but I think you might take my word for it that "houseowners", not "homeowners", is colloquial in British English, and "organisations" is the correct spelling over here. We're funny that way! Nick Gardner 13:38, 7 October 2008 (CDT)

Sorry, I hadn't checked to see in which English the article was being written. I see now that it's BE -- I'll change things back. Hayford Peirce 13:47, 7 October 2008 (CDT)

I think that I disagree with removing the verb "promises" from the intro. The indications are, at this time, that the course of the crisis will be very severe: this is not a prediction, but a statement of how the situation looks now. Replacing this with "may" seems to me to be just avoiding the issue, implying a random outcome. I think that the structural indications are so serious, that we can reasonably expect a global depression -- even if it turns out to be not quite as bad as the 1930s. Martin Baldwin-Edwards 14:14, 7 October 2008 (CDT)

I strongly disagree. The original statement "promises", ie, "just about guarantees" that things will be as bad as the Great Depression -- which lasted, you will recall, at least in the States, until the start of WWII! (When the wartime economy ended it.) That's what, 10, 11, 12 years, however you want to count it. CZ could have mud all over its face if it "promises" that we are NOW in the start of a 12-year Second Great Depression. Or so I feel. Hayford Peirce 14:32, 7 October 2008 (CDT)

Isn't there some confusion here between the 1929 financial crisis and the more persistent depression that followed it? Nick Gardner 14:54, 7 October 2008 (CDT)

I suppose that's possible. I have just reread the original sentence, "The current financial crisis promises to be as severe as the one that started in 1929." By using the word "start", that seems to me to mean the entire Great Depression. If you didn't mean that, then why don't we say, as a compromise, "The current financial crisis is already nearly as severe as that of 1929, which was the beginning of the Great Depression." On page one of the NYT Business section today, in the second paragraph of the article called "Hedge Fund Finds Itself On Defense", by Louise Story, the first sentence is: "But it can be tough for a boy wonder to grow up -- particularly in the midst of the gravest financial crisis since the Depression." So I'm not disputing that it's grave: I'm just wondering about the precise nuances that should be struck in the lede. Hayford Peirce 15:32, 7 October 2008 (CDT)

How about "The current financial crisis promises to be nearly as severe as that of 1929, which was the forerunner of the Great Depression." ? Nick Gardner 15:58, 7 October 2008 (CDT)

That would be perfect, I think. Do you want to call it the Crash of '29? Hayford Peirce 16:44, 7 October 2008 (CDT)

Yes, it is a good idea to make a clear distinction between predicting the severity of the financial crisis (which is almost upon us) and the duration of any subsequent depression. The 1930s Great Depression was largely extended by poor policy, which we hope will not happen now; but the severity of the financial crisis is comparable with that of 1929. Martin Baldwin-Edwards 19:10, 7 October 2008 (CDT)

Since we all seem to be agreed, I have altered the text accordingly. Nick Gardner 01:28, 8 October 2008 (CDT)

Since then the opening paragraph has been growing like Topsy, and seems to have lost most of its punch. Should we not call a halt to its growth, and perhaps dispense with some of its existing verbiage? Nick Gardner 10:19, 16 October 2008 (UTC)

Well, it probably shouldn't get any *longer*, but on the other hand I don't think we want to fall into the WP abyss of having every article begin with a one or two sentence summary of stunning simplemindedness. I'd rather see our opening too long rather than too short. Hayford Peirce 15:54, 16 October 2008 (UTC)

What a difference a day makes!

Wow! I can understand the opening of this, now! So I guess it takes a girl to BE BOLD? (snicker, snicker). Well done, lads! Aleta Curry 21:57, 7 October 2008 (CDT)

Timeline format

The timeline would best be formatted using Robert King's timeline tool, no? --Larry Sanger 14:55, 12 October 2008 (UTC)

A couple naive questions

Real estate prices skyrocketed through the roof around the world in the 2000s. There seems to have been real estate "speculation" going on everywhere. Is there a chance that the situation in the U.S. is merely the catalyst for exploding a financial situation that was risky everywhere? Is anybody saying that? I don't know, that's why I ask.

Everybody talks about the cause of the problem being deregulation, or lack of regulation. But isn't this an indirect cause at best? The direct cause is what the lack of regulation permitted to happen, namely, the real estate price bubble created by real estate speculation, based on ultra-low interest rates and zero-down loans. And if Fannie Mae and Freddie Mac--government-created entities--and the U.S. federal government actually permitted and encouraged that such loans be made, then isn't the problem not lack of regulation, but instead the wrong kind of regulation? Again, is anybody saying that?

It seems to me that the usual analysis of these events as I casually read in news reports is misleading and simple-minded. (So what else is new?) I hope we can do better--of course, without doing any "original research." --Larry Sanger 15:03, 12 October 2008 (UTC)

YOu are asking difficult questions, Larry. My answers are as follows: In some countries, deregulation proceeded at a very high rate from the early 1980s. The degree of risk in banking activities increased most in those countries where the dogma of free markets had the most political support -- primarily the USA and UK. The reduced level of regulation was supposed (according to proponents of deregulation) to increase economic growth without disproportionate risk, since private sector banks are managed by educated and knowledgeable people who would not want to risk their money any more (and arguably less) than governments would risk public money.

The problem with this line of reasoning is that we are structurally dependent on banks, so we cannot allow too many of them to collapse. Therefore, some commentators (even from the banking sector) argue that banks believed that the risky activities undertaken by them would in reality be underwritten by governments -- simply because we need banks in the capitalist system. If this is true, then the effect of deregulation was asymmetrical: that is to say, that we removed our controls over banks, but were unable to remove our obligations to banks. In this scenario, deregulation is the primary cause of the problem.

Of course, it is literally the case that nothing was completely deregulated and more accurately was re-regulated: the term deregulation indicates the level of control by the state being reduced, in line with neoliberal political ideology.Martin Baldwin-Edwards 15:57, 12 October 2008 (UTC)

The question which the article ought to clarify is this: if deregulation per se (and not different kinds of regulation) had anything to do with the crisis, the lack of exactly what kind of regulation is to blame? What is the mechanism of failure? --Larry Sanger 16:03, 12 October 2008 (UTC)

I'll leave it to Nick, but my immediate answer would be bank reserves to lending ratios. On top of that, all sorts of other risky stratregies emerged over the last decades to recycle money -- which in previous years would have been prohibited. Martin Baldwin-Edwards 16:09, 12 October 2008 (UTC)

Yes there was house price inflation in other countries, in many cases steeper than in the US. I have tried to indicate what seems to have set things off on the US in the article (under construction) on the subprime mortgages crisis. For the rest of the world, the subprime crisis was merely the shock that toppled an extemely unstable system. I believe that Goodhart was right in suggesting that any serious shock would have done it. Perhaps you are right in suggesting that the bursting of some other country's housing bubble could have set it off. But the US housing market was, of course, the biggest...

Deregulation, in my opinion, was not the cause but rather a necessary condition for the creation of all those clever financial instruments, as well as placing limitations upon the ability of central banks to do something about their misuse. It is hard to say whether it would have happened under the previous regulatory system, but I guess it would not.

To say that any particular thing was the cause is indeed simple-minded. In so complex a situation, it is a logical error to speak of causes rather than contributory factors. It is the relative importance of the different factors that will need original research. The rest is not all that obscure. Nick Gardner 16:16, 12 October 2008 (UTC)

Identifying what was wrong with the regulatory system and what is needed to put it right is indeed difficult - and certainly far beyond me. World experts have devoted tens of thousands of words to that question [1] without producing straightforward answers. It might take decades! Nick Gardner 16:25, 12 October 2008 (UTC)

A strange thing I seem to be seeing here in Chicago is that amidst all the predictions of doom and gloom, Help Wanted signs are everywhere, and at my current employer we are so busy I can hardly get a day off. I'm not sure what wages are being offered by these prospective employers, but...

I guess I'm failing to be as pessimistic as perhaps I should, but it looks to me as if the folks who are becoming dissappointed with the economy at this time have the common complaint that their investments are not yielding as much gain as they had hoped. Now, I don't want to minimize the importance of someone's retirement fund losing "money", but to me this seems not so different from their homes "value" declining.

That said, here are my "naive questions":

• Isn't the real value of a house that it is a home? Does anyone really forsee millions of working-class families living on the streets while millions of houses sit empty for lack of someone who can pay some astronomical price for them? When home "values" and "prices" once again come into alignment won't people simply start buying them again?

• Does someone who sought to make substantial profit by simply buying and reselling (as opposed to say, building or even buying and maintaining for commercial purposes) really deserve to be the one handsomely rewarded?

• Doesn't it seem as if things have become a little confused recently? How many homes will the typical person sell this year? If a particular person is _not_ going to sell their home, won't a reduction in the appraised value of the property basically just mean lower property taxes typically?

• Is it really true that the sky is falling?

--David Yamakuchi 17:34, 18 October 2008 (UTC)

David: I am not putting myself forward as the man who has all the answers. I have my own opinions on these matters, but in drafting the article I was merely acting as a reporter. I am very willing to discuss the content of the article here, but if you want to debate broader issues with me, it might be better to do it somewhere else. Perhaps on my talk page [2]? Or by email? What do you think? Nick Gardner 20:54, 18 October 2008 (UTC)

Drawing a line under the article

Because it - seems to me - it would be a pity to allow this article to ramble on and on in the style of Wikipedia, I suggest that we consider "drawing a line" under the present text and continuing the story elsewhere - including the article on banking failures and rescues, but also perhaps a new article on the economic fallout. This does not, of course, exclude necessary work to correct, sharpen and clarify the existing text. Nick Gardner 22:12, 13 October 2008 (UTC)

That sounds like a pretty good suggestion to me. Hayford Peirce 23:15, 13 October 2008 (UTC)

Notes on using the subpages to this article

I gotta say that I really don't like this sort of Aside to the Reader sitting so uncompromisingly in the text. I realize that it contains useful information, but I wonder if there isn't a less obtrusive way of getting it across? Hayford Peirce 23:17, 13 October 2008 (UTC)

Encouraged by that remark, I have made a change that I had been itching to make! Nick Gardner 05:35, 14 October 2008 (UTC)

Formatting question and a suggestion

Hi Nick, I think you're using the wrong formatting in at least two instances, in which you have, I guess, used blockquote formatting to indent two long summaries that you have written. My understanding of the matter is that blockquotes are only supposed to used for actual *quotations*, such as the Paul Krugman quote that I inserted into the lede. To use them elsewhere causes needless confusion for the reader -- he thinks that he is getting a quotation but is actually getting normal text. Why not simply remove the blockquotes and continue the text in normal fashion, as is the case in other CZ articles? Hayford Peirce 23:07, 15 October 2008 (UTC)

I didn't know about "blockquotes" and I have not used them. I indented the two passages because I thought it important to distinguish other people's statements from statements made on behalf of CZ. But if that is not permissible because it breaks a CZ rule, I should be content for you to make the necessary corrections. Nick Gardner 06:04, 16 October 2008 (UTC)

Okie, I removed the indent formatting. Hayford Peirce 15:45, 16 October 2008 (UTC)

"Recession of 2008"

I think we need to continue this melancholy story in a new article. I have proposed the title "Recession of 2008" with the intention of changing it when a colloquial term emerges. Nick Gardner 07:32, 16 October 2008 (UTC)

I don't think any other term will emerge, unless, sigh, it turns out to be The Great Depression of 2008. I wonder, though, if in speaking at least of the United States, you shouldn't wait until there is an officially declared recession. I think there are standard specs for defining one.... Although I suppose that if England, Europe, etc., declared themselves to be in a recession, that would be enough. Hayford Peirce 15:49, 16 October 2008 (UTC)

Economists don't need empty-headed politicians to tell them when there is a recession. I would recomment that some academic reference be provided for any sceptics. Martin Baldwin-Edwards 15:59, 16 October 2008 (UTC)

The San Francisco Fed chairman thinks we are already there [3]. Will that do? Nick Gardner 16:09, 16 October 2008 (UTC)

Don't forget the old quip that goes something like: "Economists have predicted nine of the last three recessions." Hayford Peirce 16:54, 16 October 2008 (UTC)

Do you want to bet she's wrong? I'll give you good odds. Nick Gardner 20:26, 16 October 2008 (UTC)

I just heard that Germany predicts zero growth for 2009: this is officially a recession for the world. Martin Baldwin-Edwards 21:29, 16 October 2008 (UTC)

The definition is not simple [4] Nick Gardner 14:27, 18 October 2008 (UTC)

The UK Q3 growth rate was negative. Unless it goes positive in Q4, we shall be technically in a recession. That would make an honest man of me! Nick Gardner 18:18, 24 October 2008 (UTC)

At least from the perspective of the U.S. of A., here's part of today's Business Section column by Floyd Norris:

• "The Federal Reserve Bank of Chicago maintains an index, called the National Activity Index, which in the past has nearly always signaled the beginning of a recession when it fell to a certain level, shown as negative 0.7 in the accompanying chart. It hit that level last December, and has stayed there since.

• "This week, the Fed released the reading for September, which was the worst for a single month since 1982 and a sign that the recession is deepening....

• "And yet it was not until last month that many economists began to think a recession was likely, and many believe it began in the third quarter of this year, rather than many months earlier....

• "A major reason for that delayed acceptance of the downturn was that the government initially reported the economy grew at an annual rate of more than 3 percent in the second quarter. That has been revised down to 2.8 percent, and may yet be revised lower some months from now. In any case, other factors are considered by the National Bureau of Economic Research, which makes the final decision. In the last two recessions, the downturn was over, or almost over, when the bureau finally decided it had begun.

Is this the end of the story?

I am inclined to believe that this story is now complete, and that we can soon start to consider its submission for approval. To that end, I urge all who are interested to subject it to critical scrutiny. Nick Gardner 20:33, 21 October 2008 (UTC)

The opening paragraph

It occurred to me that yesterday's description of the crisis by Alan Greenspan would be a good replacement for the rather feeble "is very severe" in the existing paragraph. Having inserted Greenspan's aphorism, I realised that it made the comparison with 1929 redundant, so I deleted it. (I had previously discovered that the 1929 crash had very little in common with the present crisis, in view of which the implied comparison of what follows with the Great Depression seemed unnecessary and unfortunate). Then I realised that what had been the topical flavour of the paragraph back in September no longer sounded right, so I did some more redrafting with a view to restoring its topicality and economising on its subordinate clauses.

Any comments? Nick Gardner 08:04, 24 October 2008 (UTC)

I think that's a good rewrite. I've done a little tweaking to smooth it out. Hayford Peirce 15:28, 24 October 2008 (UTC)

Odd

In this long article, not a single mention of Fannie Mae and Freddie Mac--the failures of which probably have the best claim to being the catalyst of the crash. --Larry Sanger 15:39, 24 October 2008 (UTC)

easy to correct, but the question is where to put it -- in the lede paragraph? If so, might that not be a little too much "inside baseball"? How many people outside the USofA have ever even heard of them? But a good point to bring up, of course. Hayford Peirce 16:16, 24 October 2008 (UTC)

You may be right, Larry, but my research seems to indicate that news of Fannie Mae's problems came out after that of Bear Stearns' - although there had been rumours (denied by Fannie Mae) that came out a little earlier [5]. Commentators at the time seemed to believe that it was the Paribas statement the triggered the credit crunch. It is difficult, of course, to compare the serious damage done to mortgage-lenders by suspected defaults, and the wider range of damage done by the credit crunch - and I may have got the balance wrong. As things stand, I agree that Fannie Mae and Freddie Mac are mentioned only on the subpages. I will consider putting a reference to them in the main article. Nick Gardner 16:26, 24 October 2008 (UTC)

Speaking from outside the USofA: I got sick and tired of Fannie and Freddie being on the news day in day out.--Paul Wormer 16:54, 24 October 2008 (UTC)

Who knew, hehe? Hayford Peirce 16:57, 24 October 2008 (UTC)

They sound to Europeans like a middle-aged married couple going through a divorce, rather than serious banking institutions... Although their "misfortunes" are seen by many as central to the crash, I doubt that history will agree. It is also irrational to think that the failings of two national lending institutions could bring down global finance on their own; it is questionable whether they are worth more than a footnote in this article. Martin Baldwin-Edwards 17:02, 24 October 2008 (UTC)

I followed the news about their failure and bailout closely, and indeed it seemed to be very basic conventional wisdom that their failure and nationalization was one of the flashpoints of the broader market reaction to the mortgage finance crisis. Obviously the failure of these two (albeit incredibly powerful and huge) institutions isn't enough to "bring down global finance on their own," but that isn't the claim. What the article should say is, at least, what almost everyone agreed upon: their failure and nationalization got people in derivatives and then the broader market very very worried. This is why I use phrases like "catalyst" and "flashpoint," and that is a fact that I doubt history will revise. That is why, clearly, they need not just a footnote, but a paragraph or a whole section in this article. --Larry Sanger 20:07, 24 October 2008 (UTC)

While I'm not sure they are "central to the crash", I do they they are more than a footnote. The crash seems to have a number of components: (i) bubbles in the US/UK/Spanish housing market, associated with over-ambitious lending practises in at least the US, and a poor job by the credit rating organizations, etc; (ii) overuse of leverage by many financial institutions, many in the US but also elsewhere; (iii) growth of complex financial instruments (principally but not entirely mortgage-backed securities) which are hard to value and assign risk to; (iv) a giant, opaque and unregulated market in various financial insurance instruments (the credit-default swaps) - and that's just off to top of my head. But the US housing bubble - of which FNMA/Freddie-Mac are a big part - is definitely a big part of the problem, because those securities were part of many of the other problems, e.g. ii) and iii).

I don't think there's be any single major 'flash point' that caused it all; rather, it's like an unstable slope, where when things finally get too steep, it only takes one pebble to start the whole thing cascading down; it starts small, and just grows and grows. Yeah, some incremental additions may be bigger than others, but they are just pieces of a bigger thing. J. Noel Chiappa 21:28, 24 October 2008 (UTC)

Conventional wisdom (of the 1980s and 90s) is what got us into this mess in the first place, so I am not convinced by that argument in the slightest. The principal issue is the failure of banks to self-regulate, which neoliberal politicians assured everyone was completely safe when recklessly deregulating the entire sector. The importance of specific failures, such as Freddie and Fannie, is probably confined to their greater vulnerability: to focus upon them is misleading and inappropriate. That almost everyone does, shows how incompetent the commentators are. Thus, a footnote is clearly needed: more can be justified, but it should be minimal to avoid overstating the importance of them. Martin Baldwin-Edwards 00:13, 25 October 2008 (UTC)

Nope, that won't fly, Martin. Obviously, the burden of proof rests on he who wants to overthrow the conventional wisdom. Your argument appears to be that this financial collapse is so complete that it utterly overturns everything--black is white, night is day, conventional wisdom deserves only little attention. If you have something more substantive to say about Freddie and Fannie, as opposed to vague dismissals, that would be interesting.

Frankly, I just don't understand what the resistance would be. The conventional wisdom is well supported and is not irrational in the slightest. Freddie and Fannie were specifically ordered by Congress to buy up risky mortgages and make it easier for lower-income people to get into housing...that was the culture of ownership stuff Bush touted throughout his first term, but definitely supported, even driven, by the Democrats. In the U.S., Freddie and Fannie served as a sort of informal insurance company in the case of bad loans...they absorbed all sorts of risky debt. I had a student loan that was bought up by Fannie Mae--well, not that it was risky debt.  ;-) This made it possible for lenders to be a little looser with their money (which is to say, with their depositors' and investors' money). That no doubt had something to do with the rise of subprime lending, etc. When the backers of this whole house of cards folded, everybody knew the game was up.

I agree that there might not have been a single flash point, but there was definitely a few highlights that more or less brought everything to a head. --Larry Sanger 02:24, 25 October 2008 (UTC)

Let's get down to specifics in terms of the article. Fannie and Freddie are a key and leading part of the thing that most of the article tries to explain. I.e., when we refer to the Crash of 2008, we aren't referring just to the crash of stock markets or housing prices, but to everything related to that, and especially to the mortgage business. So where the discussion of Fannie and Freddie belongs, obviously, is Crash of 2008#The crisis, which is desperately in need of development: there, we should describe exactly of what the crash of 2008 has consisted of, with Fannie and Freddie, bank failures, stock market crash, etc. Odd we don't have all that business when that is the Crash of 2008 itself, y'know... --Larry Sanger 02:32, 25 October 2008 (UTC)

I think it's important to distinguish between the crash (by which I mean the international banking panic which created the credit crunch) from the subprime mortgages crisis (which was something that occurred in a relatively small part of the American market). I still believe that it was the discovery of the threat that mortgage-related assets posed to the survival of Bear Stearns that prompted banks all over the world to look at their assets, discover that a lot of them were based on subprime mortgages that might be worth a lot less than they thought - and panic. It does not seem plausible to suppose that troubles at Fannie Mae or Freddie Mac could produce that reaction - even setting aside the fact that Fannie Mae was denying they had a problem at the time of the Bear Stearns crash. Undoubtedly, the subprime crisis triggered the crash, and undoubtedly Fanny and Freddy played a big part in that crisis, but I think it would be misleading to suggest - even obliquely - that it would not have happened but for them.

Getting down to specifics, I believe that the place to describe the part that they played is the article on subprime mortgages crisis. They were referred to there, but only as government sponsored agencies. I have spelled their names out there and added a sentence about their collapse. Nick Gardner 09:41, 25 October 2008 (UTC)

I agree completely, Nick. Larry is pushing the line (which I have noticed before, in other articles) that journalistic accounts are so important that they take priority over (ot at least take equal place with) expert analysis: clearly that is a non-starter. The only point that might arise from the journalistic coverage, is to set people (like Larry) right in the CZ article about what is incidental and what is substantial or structural in the global crisis. This can be done in a footnote stating that the role of the subprime collapse (esp. Fannie and Freddie) seemed central to many US commentators, but was neither the cause of the Crash nor a necessary catalyst. Martin Baldwin-Edwards 10:10, 25 October 2008 (UTC)

I basically agree with your analysis, Nick, but have only one comment. As I (imperfectly) understand things, FNMA/FHLMC played a major role in creating those toxic mortgage securities that other banks held, by buying those subprime home loans from the originators ['Later correction': I now gather that they didn't in fact buy any subprime home loans, but only better-grade - but that may not be important, since there seem to be indications that losses in the prime home loans are going to be an ever bigger problem - JNC], and reselling them on (often packaged up into mortgage bonds directly), and adding a perceived US Govt guarantee in the process. In addition, of course, without FNMA/FHLMC buying those loans from the originators, the capital of the originators wouldn't have been replenished, to allow them to make more subprime loans. So while the losses incurred by those who held FNMA/FHLMC stock may not in and of themselves have been a big hit, the sub-prime mortgages that passed through FNMA/FHLMC, and the securities based on them (and I don't know to what degree FNMA/FHLMC 'guaranteed' any of those bonds) were a big factor. Does this sound correct? J. Noel Chiappa 13:19, 25 October 2008 (UTC)

I am not at all sure about the degree to which they were responsible - it may not be fully known until the subject has been trawled over by committees of enquiry empowered to cross-examine the staff of the banks that were involved. But from what I have read, I guess that it is probably right to describe their role as "major" - but not, I would suppose, "majority". Nick Gardner 14:45, 25 October 2008 (UTC)

Everything I've read so far bears out Noel's analysis -- at least from today's perspective. Since none of us are historians writing with perfect hindsight from 50 years in the future, I do think that something along the lines of what Noel has written should go somewhere into the article. It may be that in the *long* run, the Frannie-Fred stuff will be as meaningless to the reader as similar detail about specific bank failures/takeovers/problems in 1930 and 1931 would be to the average reader of 2008. But the article can be rewritten to reflect this as the decades go by.... Hayford Peirce 17:04, 25 October 2008 (UTC)

Whereas none of us has hindsight, there is no reason to accept as "fact" some journalistic accounts. Since none of you is reading economists' accounts, then all you are citing is journalism. Sorry to tell you, but it is a load of **** ( as usual). My understanding is that the actual exposure to bad debt is fairly limited, and the crisis is actually more to do with structural change. It is a matter of interpretation of where blame lies.

This brings me to a second and MAJOR issue. If the fault lies primarily with subprime mortgages, then the policy conclusion is that socialistic intervention is a disaster. If the fault is primarily structural, and related to deregulation, it means that the neoliberal policies of USA, UK and others in the last two decades are a disaster. Although there is some role of mortgages in this, I see no reason to let the mistaken policies of governments off the hook. I also see that many people with extreme wealth at stake are trying this little trick, and fooling a lot of you. After all, global economics is very complex, so there is no reason why you should be able to understand it. So, as an economics editor, I ask you to desist from putting pressure on our authors to toe an American (neoliberal) line. Nick should be allowed to write an expert analysis, and also benefit from any other economists who wish to contribute. For non-experts, please assist with comprehensibility issues, but really you do not understand enough to comment on the analysis itself. Martin Baldwin-Edwards 20:59, 25 October 2008 (UTC)

There are journalists and there are journalists. There are quite well-respected books on previous economic events by journalists who covered them - as there are on myriad other subjects on which 'mere journalists' have written books. People like David Leonhardt of the New York Times may not be professional economists, but nonetheless are not worthless hacks.

Second, nobody (AFAICT) is saying governmental policy mistakes should be ignored. (E.g. in my list above of what I saw as the fundamental causes, failure to regulate the market in financial insurance instruents - such as the infamous CDS's - was clearly listed as a major one. Even regulators like Cox of the SEC are now admitting they failed on that one [6].) J. Noel Chiappa 14:20, 26 October 2008 (UTC)

FWIW, in the process of doing some research for Nick on the mortgage crisis, I turned up this column by Krugman which is on F+F's role in the US part of the mortgage crisis. J. Noel Chiappa 15:48, 26 October 2008 (UTC)

PS: Before anyone declares victory, let me point out this and this, which contain quotations from actual economists indicating that the 'sub-prime' market is likely to be a small share of the entire problem, which has spread into the 'prime' market too. J. Noel Chiappa 16:06, 26 October 2008 (UTC)

When trying to restore a sense of proportion in my mind about all this, it occurred to me that Paul Krugman's summary captures its essence. The trigger was, as he said, the sudden discovery of poisonous assets on the balance sheets of banks all over the world - and the crash was what followed. All the rest is secondary. How they became poisonous is not hard to understand. The details of how they got there are - but understanding them is like the pattern on a picture frame - interesting but inessential. And if Paul Krugman finds them "fiendishly complex", I shan't be mortified if I never get to understand them. I shall go on trying, and I will try to summarise my findings in the subprime mortgages article, but I am against putting them in this article. The search for a single cause for the crash is bound to be fruitless, but as Martin suggests, the question of how the banks were allowed to put themselves in a position to inflict such damage is the principal one that has to be tackled if we are to avoid a repetition. ...said Nick Gardner (talk) 04:09, 26 October 2008

Experts and amateurs

Okay, I think the suggestion of listening to the experts for expertise and the laypeople for understandability is a good one.

Going back to Hayford's post of the 24th--a lot of people outside the USA have not heard of Fanny and Freddie, and the ones who have have little idea of who these two are. Other institutions seem much more significant in the crisis: AIG, all those investment and non-bank banks which when I was graduating school seemed like the way to assure wealth. I have a hard time attributing problem mortgages in the US with a worldwide crisis; people playing with money they don't have causing a crisis makes much more sense.

In the shire next to mine, the Corporation lost a whole lotta money because they'd been told that a Lehman Bros. fund was safe as....well, they'll never see their money again. That makes sense to me: invest in f firm that goes bust, you go bust. Lots of firms going bust=crisis. A government-invented entity buying up private mortgages in the US going bust=part of the crisis.

I also fully support Hayford's post supporting Nick's analysis.

Oh, what do I know, anyway?

I'll only add that when our daughter asked what was going on and I tried to explain, probably badly, husband jumped in with much clearer explanation. He said nothing about Freddie or Fannie, and we all got it.

Aleta Curry 11:15, 26 October 2008 (UTC)

I also don't think that Fannie and Freddie were a sole, or even a leading cause. But I do think that they were a major catalyst--especially in the U.S.--that started the system spiraling out of control. The fact that you're not so familiar with them is, well, a fallacy; it proves nothing. It is a completely undisputed fact that they are huge players in the U.S. mortgage industry--if you didn't know that, now you do--and hence their failure has been a key component in the credit crunch in the U.S.

Martin, I'm not impressed (and never have been) with out of hand rejections of common analyses of a situation just because they happen to have appeared in the press. That is also a fallacy (it's called "poisoning the well"). Besides, if it is a matter of enlightened-experts-vs.-benighted-journalists, many of the people interviewed by journalists, who make it clear that the banking panic was greatly influenced at least in the U.S. by Fannie Mae and Freddie Mac, are more expert (they are, of course, economists) than anyone here. Shall I dig up a few examples of journalist interviews of/reportage about expert economists (who else) about the influence of Fannie and Freddie on the international financial crisis?

I am not impressed by posturing about who is and isn't qualified to contribute. As the leading expert about CZ's policy, I hereby rule such questions out of court. What's that you say? I'm not allowed to do that? Actually, I agree. My expert standing does not allow me to quell debate.

Again, I think part of the confusion here is that we need to be much more explicit in the article about what we mean by the "Crash of 2008" beyond "the international banking panic," i.e., merely the failure and near-failure of some banks. For example, are we saying that the international stock market crash is part of this crash, or not? Or is it something explained by the crash, which occurred only in the banking sector? If the entire weakening of the financial system (not just banking) is not part of the topic of the article, I think that with "Crash of 2008" we are just appropriating an overbroad term for our topic. Maybe something like "Banking Crisis of 2008" would be better?

All that aside, can we all agree that somebody needs to expand the section called "The crisis"? --Larry Sanger 12:53, 26 October 2008 (UTC)

If you want, ignore everything I've said above, and focus on this: the failure of Fannie and Freddie are an important, leading part of the crash in the U.S. This important fact needs to be in the article. Will someone please add it? --Larry Sanger 13:00, 26 October 2008 (UTC)

Not me. Nick Gardner 13:57, 26 October 2008 (UTC)

Larry: you are out of order. You do not have the authority over content in specialised subject areas. If you want to destroy CZ, then go ahead and insist on amateur knowledge taking priority over area experts. You will not get the support of the Editorial Council for such a position. I do not wish to quell debate: I am insisting on a minimum standard of expertise in grappling with this article. It should be clear that the principal author here has general expertise in applied economics, and he has done high-quality investigation of this topic. His findings are consistent with my less detailed knowledge of the situation. If anyone with serious economic knowledge wishes to enter the debate and to contest some of the content, this is fine. What is not fine is to harass us with newspaper reporting that does not match scientific analysis.

Furthermore, it is not a fallacy that journalism is of low quality, with rare exceptions. I have had disputes with you about this before. I have never met anyone who is a world authority on any topic who thinks that journalistic accounts are of acceptable quality: my own experiences of how journalists distort and manipulate to suit their own agenda is very clear. You may not accuse me of "poisoning the well" which I find an offensive slur. The fact is that we expect serious articles to be based on serious sources, and newspapers are not such. End of discussion. Martin Baldwin-Edwards 14:39, 26 October 2008 (UTC)

I hate to argue with you about this Martin, but are you telling us that Paul Krugman, New York Times columnist and recent recipient of the Nobel Prize for Economic Sciences is a "low quality" source? You can't really be serious! Hayford Peirce 17:01, 26 October 2008 (UTC)

You do not prove a general rule by finding one or two exceptions. It may well be that Krugman is writing good stuff on the topic, but I am talking about run of the mill journalism. Martin Baldwin-Edwards 19:05, 26 October 2008 (UTC)

"Out of order"? Please. I stand by everything I say, Martin, and I encourage you to actually read it. Anyway, I must move on to other things now. As editor-in-chief, all I want to insist on at this point is that as a matter of our official policy, non-experts may continue to debate all issues on this talk page, and they should not feel intimidated by suggestions to the contrary. Over and out. --Larry Sanger 15:07, 26 October 2008 (UTC)

"You are out of order." Martin, we don't use such language on CZ. Nobody declares other people "out of order," as if this were a court. I'd also comment on your own style, but that is inconsistent with CZ:Professionalism and belongs in e-mail.

"You do not have the authority over content in specialised subject areas." I wasn't taking authority over specialized subject areas. I was raising a question (why no mention of Fannie and Freddie), arguing my case (above), and making a suggestion (why not add in some mention of this as part of the crisis in "The crisis" section). None of this, and none of the other things I said, were or were meant to be an exercise of Editor-in-Chief authority. Moreover, I have to say that I resent the uncharitable suggestion that I was exercising such authority.

"You will not get the support of the Editorial Council for such a position." I wouldn't dream of taking this dispute to the Editorial Council, and the fact that you think I might demonstrates how little you understand the dynamic here, at least on my end. Unlike those who might suggest that only experts should be able to comment on the article's content, I do not regard disputes as grounds for a constitutional crisis and a power struggle. I regard them as grounds for reasoned discourse.

"I do not wish to quell debate: I am insisting on a minimum standard of expertise in grappling with this article." Forgive me for not understanding, then. This sounds like a self-contradiction. How am I wrong? When you say "I am insisting"--and who are you to insist on this, Martin, by the way?--"on a minimum standard of expertise in grappling with this article," it sounds as if you are saying that debate about the fine points of what the article says is out of bounds for non-experts. In that case, how do you not wish to quell debate? And, in my capacity as Editor-in-Chief, I am instructing you that this is all completely incorrect as a description of CZ's policy.

"It should be clear that the principal author here has general expertise in applied economics, and he has done high-quality investigation of this topic. His findings are consistent with my less detailed knowledge of the situation." I am not at all questioning Nick's expertise, or even yours. I am asking you to justify what seems to me a very puzzling omission. I'm also asking someone, anyone, to finish writing the section that actually describes the subject of the article--the crash itself--as opposed to all the explanations thereof. Also, by the way, and at the risk of being pedantic, there are no such things as "principal authors" here on CZ. Hence, challenges to the article are not to be taken as challenges to "the authors" of the article, or their credentials, but rather, challenges to a shared text (which itself is "beyond credentials"). Still, I am very tempted to ask some other economists to come here and work on our--not Nick's article, not your article, but our--article.

"His findings are consistent with my less detailed knowledge of the situation. If anyone with serious economic knowledge wishes to enter the debate and to contest some of the content, this is fine." It is also fine if someone with less than serious economic knowledge to contest the content, particularly if he or she can mount a cogent argument. Again, this is and always has been our policy, and please do not suggest to the others here, Martin, that it is not.

"What is not fine is to harass us with newspaper reporting that does not match scientific analysis." First, asking questions and making arguments does not constitute harrassment. As soon as an editor can credibly claim that it is, this is no long the Citizendium but instead an Expertpedia which is barely tolerant of hoi polloi. Second, I was not "harassing you" with newspaper reporting, but with arguments. The arguments, as I have said at least twice, are made by expert economists in the U.S. (To be clear, my claim was that there are many expert economists in the U.S. who believe that the policies and subsequent collapse of Fannie and Freddie was an important factor in ushering in the financial crisis in the United States. And the weakening of the financial system in the U.S. obviously had a contributory effect on the weakening of the financial systems in the rest of the world.) I did not present you with a single press report, but I admit that the press is where I learned about the events. And you didn't learn about them from the same source?

"Furthermore, it is not a fallacy that journalism is of low quality, with rare exceptions. I have had disputes with you about this before. I have never met anyone who is a world authority on any topic who thinks that journalistic accounts are of acceptable quality..." First, my argument does not rest on the claim that journalism is not of low quality. It is a straw man to suggest that it does. I do not rely on press reports for my opinions; I rely on arguments, as well as the expert opinions that, it so happens, are reported by news articles. Martin, you are the one who brought up the business about the press and its unreliability. I raised questions and made an argument. Second, as to the merits of the claim, "journalism is of low quality," this is a fallacy insofar as it is so vague as to be incapable of evaluation. When the press reports what the prime rate was set at, or what the Dow was at the end of the day, such facts can be relied upon. When a reporter transcribes what an expert says, then with a few caveats e.g. about context, we can assume that that is what the person said. And, of course, when a reporter suggests a simple-sounding cause of a complex phenomenon, such reportage should be taken with a grain of salt at best. -- Moreover, all of this is obvious. You need not advert to the attitudes of "world authorities" to know all this; any good high school or college student knows it very well.

"You may not accuse me of 'poisoning the well' which I find an offensive slur." Nonsense--no, it's not. To accuse someone of committing a fallacy is not a "slur." As long as it is done in a temperate way, with no suggestion about negative personal qualities of the person committing the fallacy, it's fine. We all commit fallacies on a shockingly regular basis. To point this out is perfectly consistent with CZ:Professionalism.

"The fact is that we expect serious articles to be based on serious sources, and newspapers are not such." First, if you mean to say we should never cite newspapers, you are wrong both on principle and in point of CZ policy. We can, do, and should cite newspaper reports when appropriate. The question is, of course, when it's appropriate. If we wish to give readers a pointer to a more in-depth description of a recent event, we might send them to a news report from The New York Times or The Times of London. We don't cite the opinions of reporters and columnists (oh...unless they are Paul Krugman, right?) for things like broad historical explanations of financial collapses, but we might cite them for clear quotations from experts, or for data about when various events took place (e.g., when Fannie Mae was bailed out). Second, Martin, please stop making dogmatic-sounding and blanket claims about CZ policy--about what "we expect"--especially to me, when you know I disagree with them.

I hope this helps. If you'll leave well enough alone, Martin, that will be the end of the debate for me. --Larry Sanger 16:05, 26 October 2008 (UTC)

Larry, I am not going to respond to all of those points. The most important things to note are the following: (1) newspaper analyses are unreliable, and need expert interpretation if they are going to be used at all. As a matter of academic principle, they should not be used except for simple factual information or accurate reporting of expert views. (2) Although CZ does not recognise "principal authors" -- mainly because you opposed some attempts to do exactly that -- this is the reality "on the ground" for many articles, including this one. Without Nick, there would be no article worth discussing. (3)Asking questions and engaging in a dialogue about the answers is fine, and should be unrestricted. My problem with the discourse here is that several of the non-expert participants here (including you, Larry) were telling Nick that his analysis was wrong, or incomplete. As an economics editor who has not contributed to this article, I decided to weigh in and protest on his behalf. (4) There is, and always will be, some tension between expert authors and non-expert authors on CZ. For many articles, that tension can be resolved simply by debate and explanation, and perhaps revisions where needed. However, in this specific case there was a clear problem that the non-experts were in complete disagreement with the two experts. If you can attract more economists to participate in this debate, then Nick and I would actually be grateful. Nick has been trying for some time to attract more expert economists to CZ: this is not an issue of article "ownership" at all. The problem with the "cogent arguments" being presented here is that they are, in Nick's and my judgements, serious distortions of the actuality. Who is to rule on this? Obviously, only an economics editor can do so. That is not the role of Editor-in-Chief, especially as you were advocating specific changes to the article and thus became a party to the dispute. Martin Baldwin-Edwards 16:36, 26 October 2008 (UTC)

On (2), I maintain that CZ is a fully collaborative project. That is why we can have no principal authors. Also, this is a point we have never debated, as far as I know. We have only debated how to test and possibly implement a program to give credit to authors on article pages. Granted, there are people who are mostly responsible for a given article (I have a number for which I'm solely or mostly responsible myself), but this does not mean that they are "principal authors" with all that typically entails in terms of rights, control, and honor. I agree that without Nick, there would be no article here (or a much smaller and worse one), and we should of course honor him for that. As to (4), you thought that I was insisting on my view about the content of the article in my capacity of Editor-in-Chief; as I said, I am not. I do not concede your claim that the Editor-in-Chief (and the Editorial Council?) does not ultimately have authority over content questions, but that is an issue for us to deeply clarify and debate another day. As to the other points--the less the said the better at this point. --Larry Sanger 17:12, 26 October 2008 (UTC)

We are in full agreement concerning all of your last post. Also, I had not meant to imply any rights associated with the de facto "principal authorship" -- merely to point out that it is one person's expertise that has produced this article. Martin Baldwin-Edwards 17:55, 26 October 2008 (UTC)

several of the non-expert participants here .. were telling Nick that his analysis was wrong, or incomplete - This puts a spin on some comments made here that this particular commenter never intended - which I had hoped I made clear by using phrases such as "As I (imperfectly) understand things" and "Does this sound correct?". Rather, I was trying to bring some points forward in the discussion, and asking (not "telling") if there was anything to them. Is this not the very "Asking questions and engaging in a dialogue" you spoke of? J. Noel Chiappa 18:18, 26 October 2008 (UTC)

Your humility in this discussion was noted and appreciated, Noel. Martin Baldwin-Edwards 19:08, 26 October 2008 (UTC)

Recession

Just read the opening again after a hiatus and it makes good sense to the layman.

Could one of you define 'recession' and add it to the glossary? I can't.

That reminds me--there's no recession article--did we ever settle it as to whether or not the wiki pointed to a definition if there is no full article yet?

Aleta Curry 03:12, 25 October 2008 (UTC)

Point taken. I will do both a definition and a very brief article. Nick Gardner 06:26, 25 October 2008 (UTC)

PS: See Recession (economics) - Nick Gardner 10:48, 25 October 2008 (UTC)

The role of Fanny Mae and Freddy Mac

Could we please take a break from debating CZ policy issues, and return to the origin of the dispute - namely Larry's contention that Fanny Mae and Freddie Mac probably have " best claim to being the catalyst of the crash". My refusal to put that in this article was based solely upon the absence of evidence for it. I am (reluctantly} willing to accept that it is the received wisdom in the US, and that that places the onus for refutation upon people, like me, who contest it. But, with Noel's assistance, I have searched for its origin in NYT articles (see the subprime mortgage crisis talk page). I could not find it there. Where should I look? Nick Gardner 22:36, 26 October 2008 (UTC)

Not that it's important, but it's Fannie and Freddie :-) Martin Baldwin-Edwards 22:49, 26 October 2008 (UTC)

I just looked through some back articles by Paul Krugman and didn't find anything like that either. Or at least not in so many words. I think that the *perception* in the US of the failure of the two FMs was in large part psychological. But at least in the States, that certainly led to even greater mistrust of other financial institutions. Hayford Peirce 01:01, 27 October 2008 (UTC)