Disclaimer The opinions expressed herein are my own personal opinions and do not represent my employer's view in anyway.
As the dust settles from the "financial meltdown" that we've been dealing with the last several weeks, it seems to be increasingly clear that... well... nothing melted down. Yes, there were some issues with sub-prime mortgages that caused issues with certain financial institutions that had over leveraged and made bad decisions. But the reality is, the fundamentals of the economy actually are pretty strong, and the massive bailout that we passed was more than likely not necessary.
Most of the bad lending decisions that were made needed to be corrected, and could have easily occurred through normal bankruptcy law.
The Federal Reserve of Minneapolis put together an excellent whitepaper which examines many of the "so called facts" of the crisis, and finds them mostly to be untrue:
The financial press and policymakers have made the following four claims about the nature of the crisis. Bank lending to nonfinancial corporations and individuals has declined sharply. Interbank lending is essentially nonexistent. Commercial paper issuance by nonfinancial corporations has declined sharply, and rates have risen to unprecedented levels. Banks play a large role in channeling funds from savers to borrowers. Here we examine these claims using data from the Federal Reserve Board. Our argument that all four claims are false is based on data up until October 8, 2008.
The financial press and policymakers have made the following four claims about the nature of the crisis.
Here we examine these claims using data from the Federal Reserve Board. Our argument that all four claims are false is based on data up until October 8, 2008.
The paper is complete with charts and graphs that show everything pretty clearly, even if you don't have an MBA. Here is a bit more of a common sense look at things from UCLA economist Lee Ohanian which is worth watching as well.