In the video above, CNBC analyst Steve Leisman interviews Andre W. Lo who recently wrote Reading About the Financial Crisis: A 21-Book Review, available on Prof. Lo's website (here). You might know Andrew Lo from another book he wrote A Non-Random Walk Down Wall Street which argues that the random-walk view of financial markets is not quite accurate (for more on this, see my other blog piece here).
In the interview above, Prof. Lo argues that two of the myths surrounding the Financial Crisis of 2007 are probably wrong: (1) the argument that there was excessive risk taking (investment banks taking risks with other people's money) ignores the fact that many investment bankers lost large amounts of their own personal fortunes during the crisis and (2) the argument that mortgage lenders engaged in predatory borrowing seems contradicted by the sophisticated attempts of average home owners to purchase and "flip" house to make quick profits.
One might quibble with the quick points Prof. Lo made during the interview, but his lengthier paper reviewing the 21 books about the Financial Crisis is worth reading. The bottom line is that we still do not understand the financial crisis and well-intentioned policy attempts to prevent future crises, such as the 2010 Dodd-Frank Act, may or may not be trying to solve problems that either don't exist or are the symptoms of deeper, poorly understood, more fundamental factors.
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