Something I’ve read that sparks my interest: is there any way to compare what’s happening now with the savings and loan collapses of the Eighties? Could what happened then be a predictor for now? Contain lessons for today, suggesting a course of action? Anything?
There are some similarities. Financial innovation meant that risks that were not adequately understood were undertaken by various people. There was misplaced confidence in old regulatory regimes that didn’t show up until asset prices stopped rising.
The big difference here is the system-wide uncertainty: it’s not clear where the real “toxic” positions are or whether lots of otherwise sound businesses are exposed by virtue of who their unwise customers or creditors are.