The Blind Monks and the Elephant: Contrasting Narratives of Financial Crisis. (29th August 2018)

• Record Type: Journal Article
• Authors: Miller, Marcus; Rastapana, Songklod; Zhang, Lei
• Is Part Of: Manchester school. Volume 86(2018)Supplement 1
• Page Start: 83
• Page End: 109
• Publication Date: 2018-08-29
• Subjects: Economics -- Periodicals; Social sciences -- Periodicals; Economics -- Sociological aspects -- Periodicals; 330.05
• DOI: 10.1111/manc.12236
• Languages: English
• ISSNs: 1463-6786

Abstract

Abstract : 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.