Whom to Thank for This Mess
Bad decisions starting in the '80s triggered the credit crisis
By Ambreen Ali,  Newser User
Posted Dec 9, 2008 2:59 PM CST

(Newser) – This financial crisis brewed over decades of bad decisions, and, in Vanity Fair, economist Joseph Stiglitz makes sure credit is given where due:

  • In 1987 President Reagan appointed anti-regulation Alan Greenspan to a regulatory post.
  • Greenspan offered the markets a "flood of liquidity" that boosted inflation and caused two financial bubbles.
  • The Glass-Steagall Act was repealed in 1999, allowing commercial banks to become high-risk borrowers.

  • President Bush's tax cuts failed to bolster the economy, so the Fed lowered interest rates.
  • Soaring oil prices forced the US to spend hundreds of billions, funded through loans.
  • Accounting legislation ignored stock options, whose arbitrary value allows for balance sheets to be superficially inflated.
  • Treasury Secretary Henry Paulson haphazardly bailed out companies this fall, and still hasn't "addressed the underlying reasons" for frozen credit.