The major financial crises of the last 30 years are analyzed and some common features brought to light: lax supervision, easy money, risk appetite, legislative follies and regulatory mistakes. The current crisis contains all these elements. The current disaster were brewed in USA in the ‘80ies by some regulatory acts aimed at proving that, contrary to the opinion of most economists trouble‐ makers, free lunches do exist. The US money market has shown a complete reversal since 1981 with falling average rates and a growing market “intolerance” to interest rates increases. This change has been largely caused by the introduction in 1981 of Adjustable Rate Mortgages that enhanced the effects of the rate rises. The many recent studies and regulatory proposals are then compared. While there is an amazing general consensus on the causes of the crash, regulatory proposals, ranging from the UK Conservative Party “white paper”, to the disappointing US plan, present some differences.
Publication Date
Financial Markets Group Special Papers SP 189
