Greed, Bailouts, and the Causes of the Financial Crisis

Former FDIC regulator Sheil Bair explains who is responsible for the financial crisis.

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We have a market-based economy. Do you get bailed out if you get in trouble with your mortgage? No. You file for bankruptcy. The government doesn't bail you out. The small businesses don't get bailed out. When people have business models where the market assumes that the government is always going to step in, it creates incentives to take risks because the people who are running those institutions know that they'll get all the benefit of the upside and then they can put the downside on the government.

What can the public do?

Educate yourself, become engaged. That's one of the reasons I wrote my book. We set up a group called the Systemic Risk Council, a group of former government officials, senators, and regulators and administrative people and former industry people and academics, who are there to identify the public interest and advocate for strong measures to promote the public interest and to counter some of the special interest lobbying pressure.

  • See 2012: The Year in Cartoons
  • Read David Brodwin: Why We Need the Government in the Marketplace
  • Read the U.S. News Debate: Is Going Over the 'Fiscal Cliff' Necessarily the Worst Outcome?