Gambling with Other Peoples Money: How Perverse Incentives Caused the Financial Crisis (692)

What caused the Financial Crisis of 2008? While government mandates and private sector mistakes did contribute to the crisis and can be blamed at least in part for what happened, this book takes a different approach. Russ Roberts argues that the true underlying cause of the mess was the past bailouts of large financial institutions that allowed these institutions to gamble carelessly because they were effectively using other people's money. The author warns that despite the passage of Dodd-Frank, it is widely believed that we have done nothing to eliminate ‘Too Big to Fail.' That perception allows the largest financial institutions to continue to gamble with taxpayer money. Acknowledgements -- Preface to the 2019 edition -- Introduction -- Gambling with other people's money -- Did creditors expect to get rescued? -- What about equity holders? -- Heads : they win a ridiculously enormous amount : tails : they win just an enormous amount -- How creditor rescue and housing policy combined with regulation to blow up the housing market -- Fannie and Freddie -- Fannie and Freddie : cause or effect? -- Commercial banks and investment banks -- Picking up nickels -- Basel : faulty -- Where do we go from here? -- Notes -- Index -- About the author