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The Blind Monks and the Elephant: Contrasting Narratives of Financial Crisis
Author(s) -
Miller Marcus,
Rastapana Songklod,
Zhang Lei
Publication year - 2018
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12236
Subject(s) - treasury , narrative , financial crisis , economics , financial system , subprime crisis , externality , finance , relevance (law) , business , monetary economics , political science , keynesian economics , law , philosophy , linguistics , microeconomics
We explore three persuasive narratives of the US subprime crisis. First the role played by pecuniary externalities in amplifying shocks to the quality of risk‐assets held by Investment Banks; second is adverse selection in marketing these assets; and third is financial panic . Their relevance is attested by the emergency support provided by the US Federal Reserve Bank and Treasury; and by subsequent findings in courts of law. While these contrasting narratives illuminate different aspects of the crisis, we conclude it was because they all had a part to play that the US financial system was so exposed to radical failure.