The Busts Keep Getting Bigger: Why?

Paul Krugman and Robin Wells

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick

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Nicole Bengiveno/The New York Times/Redux

Charles Prince, left, in 2003, when he took over as chief executive of Citigroup after the resignation of Sanford Weill, right

Suppose we describe the following situation: major US financial institutions have badly overreached. They created and sold new financial instruments without understanding the risk. They poured money into dubious loans in pursuit of short-term profits, dismissing clear warnings that the borrowers might not be able to repay those loans. When things went bad, they turned to the government for help, relying on emergency aid and federal guaranteesthereby putting large amounts of taxpayer money at riskin order to get by. And then, once the crisis was past, they went right back to denouncing big government, and resumed the very practices that created the crisis.

What year are we talking about?


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