Two Bush administration appointees, Director of the Economic Council Keith Hennessey and Council of Economic Advisers Chairman Edward Lazear, have prepared an interesting paper with 19 observations on the financial crisis. You can access their summary or the PDF of the paper.
I found a couple of their observations particularly interesting. They link the financial crisis to a large inflow of capital into the United States in the mid-2000s — a contrast to the usual pattern in which capital flows out from rich countries to poorer countries. As a result, they write, “cheap credit made risky investment seem profitable.” Risky investment, particularly in mortgage-backed securities, which government regulations treated as low-risk investments — incorrectly, as it turned out.
