CUP Web site

RSS Feed

New Books

Author Interviews

Author Events

Keep track of new CUP book releases:

For media inquiries, please contact our
publicity department

CUP Authors Blogs and Sites

American Society of Magazine Editors

Roy Harris / Pulitzer's Gold

Natalie Berkowitz / Winealicious

Leonard Cassuto

Mike Chasar / Poetry and Popular Culture

Erica Chenoweth / "Rational Insurgent"

Juan Cole

Jenny Davidson / "Light Reading"

Faisal Devji

William Duggan

James Fleming / Atmosphere: Air, Weather, and Climate History Blog

David Harvey

Paul Harvey / "Religion in American History"

Bruce Hoffman

Alexander Huang

David K. Hurst / The New Ecology of Leadership

Jameel Jaffer and Amrit Singh

Geoffrey Kabat / "Hyping Health Risks"

Grzegorz W. Kolodko / "Truth, Errors, and Lies"

Jerelle Kraus

Julia Kristeva

Michael LaSala / Gay and Lesbian Well-Being (Psychology Today)

David Leibow / The College Shrink

Marc Lynch / "Abu Aardvark"

S. J. Marshall

Michael Mauboussin

Noelle McAfee

The Measure of America

Philip Napoli / Audience Evolution

Paul Offit

Frederick Douglass Opie / Food as a Lens

Jeffrey Perry

Mari Ruti / The Juicy Bits

Marian Ronan

Michael Sledge

Jacqueline Stevens / States without Nations

Ted Striphas / The Late Age of Print

Charles Strozier / 9/11 after Ten Years

Hervé This

Alan Wallace

James Igoe Walsh / Back Channels

Xiaoming Wang

Santiago Zabala

Press Blogs


University of Akron

University of Alberta

American Management Association

Baylor University

Beacon Broadside

University of California

Cambridge University Press

University of Chicago

Cork University

Duke University

University of Florida

Fordham University Press

Georgetown University

University of Georgia

Harvard University

Harvard Educational Publishing Group

University of Hawaii

Hyperbole Books

University of Illinois

Island Press

Indiana University

Johns Hopkins University

University of Kentucky

Louisiana State University

McGill-Queens University Press

Mercer University

University of Michigan

University of Minnesota

Minnesota Historical Society

University of Mississippi

University of Missouri


University of Nebraska

University Press of New England

University of North Carolina

University Press of North Georgia

NYU / From the Square

University of Oklahoma

Oregon State University

University of Ottawa

Oxford University

Penn State University

University of Pennsylvania

Princeton University

Stanford University

University of Sydney

University of Syracuse

Temple University

University of Texas

Texas A&M University

University of Toronto

University of Virginia

Wilfrid Laurier University

Yale University

June 20th, 2012 at 10:45 am

Richard Posner on Financial Regulatory Reform and the Politics of Denial

The Economists' Voice 2.0, Aaron Edlin, Joseph StiglitzRichard Posner’s essay “Financial Regulatory Reform: The Politics of Denial,” included in The Economists’ Voice 2.0: The Economists’ Voice 2.0: The Financial Crisis, Health Care Reform, and More, explores the question of whether, as is the case, those officials complicit in the causes of the financial crisis write the reforms. In the article, Posner explores some of the causes and then argues that we should not be swayed by passions, populist or otherwise, in reforming the financial system but also should find some new experts when the time comes.

Here is an excerpt from “Financial Regulatory Reform: The Politics of Denial”:

The likeliest explanation for why these regulatory failures are be­ing ignored is that the government’s senior economic officials—Ben Bernanke, Timothy Geithner, and Lawrence Summers—were im­plicated in the failures and therefore do not want to draw attention to them. We are in the presence of the politics of denial….

Summers and Geithner, along with Robert Rubin (Rubin and Summers being in succession Secretaries of the Treasury in the Clin­ton administration), were complacent about the growing risk-taking of banks and other financial intermediaries and opposed the regula­tion of credit-default swaps, now recognized to have contributed to the financial collapse. Even though housing prices began their long, steep decline early in 2006 and the banking industry (especially the “shadow banking” industry of broker-dealers and other “nonbank banks”) was known to be very heavily invested in mortgage lending, the Federal Reserve, the SEC, and other regulators of financial prac­tices and products did little to avert financial disaster because they underestimated the looming losses to banks’ loan portfolios as housing prices fell and defaults rose. Until Lehman Brothers collapsed, the regulators didn’t realize how serious the situation was, even though the financial collapse had been building since the middle of 2007 and accelerating since March 2008, when Bear Stearns collapsed….


Our reform-minded officials need a better understanding of the causes of the 2008 financial collapse, and for that they need to look inward. It is a bad sign that Bernanke and the others refuse to ac­knowledge their own contribution to the collapse. It is another bad sign that proposals for ambitious regulatory reform have been made, and are being pressed, before the financial crisis has run its course and before there has been an impartial, in-depth study of the causes of the crisis. I have given my own view of those causes in this chapter and at greater length in my book (Posner 2009), but I do not claim that it is definitive. Congress has appointed a Financial Crisis Inquiry Com­mission (FCIC) to conduct an eighteen-month study of those causes, and reform proposals should be tabled until the study is completed and evaluated—that, or a better study. For I have no great hopes for the FCIC. It is bipartisan rather than nonpartisan, none of its mem­bers is a professional economist, and its executive director is a prose­cutor. It is likely to embrace the populist theory of the crisis without adequate reflection.

Fortunately there is no great urgency about restructuring the financial regulatory system. Everyone in the system, public and private, is hyperalert to signs of new bubbles and excessive risk- taking. Everyone on the private side is concerned to avoid the kind of risk-triggered failure that invites a government takeover and a con­gressional inquisition, and everyone on the public side is concerned with steering the economic recovery between the Scylla of economic stagnation (even deflation) and the Charybdis of runaway inflation.

Let us see how the recovery proceeds. There will be time enough to address issues of financial regulatory reform when a restored econ­omy enables such issues to be addressed candidly, not defensively; professionally, not angrily; patiently, not hastily—and by a fresh team, unembarrassed and unconstrained by past errors.

Post a comment