[...].. .the ditch into which the financial crisis and the Great Recession drove it Unemployment remains high, the budget deficit is still huge, and the mortgage foreclosure problem festers In Europe, the crisis is still unfolding Some of the remedies put (or not put) into place in response to the crisis remain under vociferous, and often highly partisan, debate That includes the Dodd-Frank financial. .. concentrates on the what and especially the why of the financial crisis and its aftermath It’s a long and complicated story, but some understanding is essential for the better functioning of our democracy So before getting enmeshed in the details, here is a very brief history of the financial crisis, the Great Recession, and the U.S government’s responses to each It will take only four paragraphs The fourth... devastating The stock market also collapsed under the strain, turning many 401(k)s into—in the dark humor of the day —“201(k )s. When America’s financial structure crumbled, the damage proved to be not only deep but wide Ruin spread to every part of the bloated financial sector Few institutions or markets were spared, and the worst-affected ones either perished (as in the case of Lehman Brothers) or... held in such ill repute that politics will stand in the way the next time a financial crisis hits Did We “Waste” the Financial Crisis of 2007–2009—in Emanuel’s Sense—or Did We Put It to Good Use? Specifically, were the financial reforms enacted in 2010 well or poorly designed to create a sturdier financial structure? What did they leave out? Has the financial industry cleaned up its act? Perhaps most... Critical Questions Another aspect of the crisis motivates this book: Even today, despite numerous works on the crisis some of them excellent—most Americans remain perplexed by what hit them They have only a limited understanding of what the U.S government did, or failed to do, on their behalf—and, more important, why They also harbor several major misconceptions In consequence, the Tea Party movement... on the road, prospering while other Americans suffer Perhaps most of all, they are anxious about what the future may bring As late as the 2012 election, a strong majority of Americans were telling pollsters that the country was still “on the wrong track” or “heading in the wrong direction.” No wonder we heard populist political thunder from both the Right (the Tea Party movement) and the Left (the. .. FINANCIAL CRISIS AND THE GREAT RECESSION Historical perspective accrues only with the passage of time, and we are still living through the aftermath of the frightening financial crisis and the Great Recession that followed closely on its heels.* But enough time has now elapsed, and enough dust has now settled, that some preliminary judgments can be made Consider this book a second draft of history There... how the crisis developed and unfolded Parts III and IV then dwell on the policy responses—first, the emergency actions that were taken to forestall catastrophe, and then the longer-term fixes that were (and were not) put into place This section of the book ends with an important chapter that tries to unravel the essential paradox of the entire episode: that under-regulated markets ran badly off the. .. badly off the tracks and the government rushed in to save the day, yet the government emerged as a villain Why were the policy successes (and some failures) greeted with Bronx cheers? After the review of the past and the present, part V turns to the future How do we get out of the remaining mess? What lies ahead? What have we learned from our bitter experience? WITH THANKS There is a sense in which... it’s because they were The financial “accidents” that took place between the summer of 2007 and the spring of 2009 had severe consequences, which Americans experienced firsthand But most citizens are baffled, and many are extremely displeased, by what their government did in response to the crisis They question the justice of the seemingly large costs taxpayers had to bear, and they wonder why so many . Practice Economics: Principles and Policy AFTER THE MUSIC STOPPED THE FINANCIAL CRISIS, THE RESPONSE, AND THE WORK AHEAD ALAN S. BLINDER THE PENGUIN PRESS New York 2013 THE PENGUIN PRESS Published by the. published by Sony/ATV Music Publishing. All rights reserved. LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA Blinder, Alan S. After the music stopped : the financial crisis, the response, and the. financial crisis, the Great Recession, and the U .S. government s responses to each. It will take only four paragraphs. The fourth may surprise you. The Supershort Version The U .S. financial system,