February 15, 2010 Reading Time: < 1 minute

“Why did the U.S. financial system nearly collapse last year? People blame Wall Street’s excessive greed and risk-taking. But without easy money, the massive risk-taking could not have happened. To be sure, financial firms leveraged up—that is, they did a lot of business with borrowed money. That juiced up revenues and bonuses in the boom—and exacerbated losses in the downturn. Selling notes based on questionable mortgages as collateral was one method for tapping into the money sloshing around.” Read more.

“Financial Crises and the Federal Reserve’s Punch Bowl”
Chidem Kurdas
The Freeman, December 2009, Vol. 59, Issue 10.
Via the Foundation for Economic Education.

Tom Duncan

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