Home
/
RELIGION & LIBERTY ONLINE
/
The Financial Crisis: What We (Still) Haven’t Learned
The Financial Crisis: What We (Still) Haven’t Learned
Oct 15, 2026 1:56 AM

It’s over a year now since the 2008 financial crisis spread havoc throughout the global economy. Dozens of books and articles have appeared to explain what went wrong. They identify culprits ranging from Wall Street financiers overleveraging assets, to ACORN lobbying policy-makers to lower mortgage standards, to politicians closely connected to government-sponsored enterprises such as Freddie Mac and Fannie Mae failing to exercise oversight of those agencies.

As time passes, armies of doctoral students will explore every nook and cranny of the 2008 meltdown. But if most governments’ policy responses to the crisis are any guide, it’s apparent that many lessons from the financial crisis are being ignored or escaping most policy-makers’ attention. Here are five of them.

Perhaps the most prominent unlearned lesson is the danger of moral hazard. The message conveyed to business by many governments’ reactions to the financial crisis is this: if you are big enough (or enjoy extensive connections with influential politicians) and behave irresponsibly, you may reasonably expect that governments will shield you from the consequences of your actions. What other message could businesses such as AIG, Citigroup, Royal Bank of Scotland, Lloyds, and Bank of America have possibly received from all the bailouts and virtual nationalizations?

A second unlearned lesson is that once you allow governments to increase their involvement in the economy to address a crisis, it is extremely difficult to wind that involvement back. Indeed, the exact opposite usually occurs.

Who today remembers the stimulus and bailout packages so heatedly debated in late-2008? They pale next to the fiscal excesses of governments in America and Britain throughout 2009. Recessions and subsequent government interventions create an atmosphere in which the hitherto implausible – such as trillion-dollar, 1900 pages-long healthcare legislation in an era of record deficits – es thinkable. Likewise the Bush Administration’s bailout of Chrysler and GM morphed into the Obama Administration’s virtual appropriation of the same panies.

Third, we seem unwilling to accept that government policies initially presented to us as the only thing standing between stability and economic Armageddon invariably have unforeseen (or sometimes very predictable) negative consequences that are not easily resolved.

Federal Deposit Insurance Corporation Chairman Sheila Bair recently claimed, for example, that the American government’s decision to purchase capital in failing banks was, in retrospect, a mistake. Not only has government semi-ownership plicated the moral hazard problem, but it has created dilemmas that flow directly from the fact of government intervention. “Do we contain the bonuses and pensation,” Bair asked, “because they are partially taxpayer owned, which might make things worse because they can’t bring in new and better management, which in some cases might be necessary?”

Fourth, there is the knowledge predicament. Today there is widespread acknowledgement that the 2008 financial crisis owed much to the Federal Reserve keeping interest rates too low for too long. Yet we persist in imagining that a group of people – the Fed’s seven governors – can somehow manage the credit and monetary environment of a $14.4 trillion economy (2008) in pursuit of often mutually exclusive goals: stable prices, optimal employment, and moderate long-term interest rates.

Fifth, there is reluctance to acknowledge how much the financial crisis reflects the breakdown of concepts of fiduciary responsibility: i.e., the moral and legal responsibility that someone acquires when entrusted with another person’s resources.

Many CEOs have been rightly pilloried for their failures. But what, for example, of those boards of directors who presided over fiascos such as Lehman Brothers, Fannie Mae, Freddie Mac, and the 147 American banks that failed between January 2008 and November 2009?

Why were board directors not asking questions about a bank’s heavy reliance for its profits upon the alchemy of mortgage-based securities and other financial products that no-one apparently could understand? Why did they not query reports advising that particular investment models could mathematically fail only once in a million years? Why did boards only take action to replace fund managers panies were teetering on bankruptcy? Why did some directors imagine that a firm’s generation of quarterly profits was sufficient indication that they were fulfilling their fiduciary responsibilities?

Of course, it’s usually counterproductive for directors to immerse themselves in the micro-details of a firm’s operations. But it is part of their fiduciary obligation to investors to pany employees and take action when the answers are not ing or unsatisfactory. Indeed it’s more than a fiduciary responsibility: it’s the moral obligation of anyone placed in a position of stewardship of others’ resources.

One measure of a society’s inner strength is its willingness to learn from mistakes and alter behavior appropriately. Sadly, in the case of America and most Western countries, the 2008 financial crisis’ long-term significance may be its illustration of how unwilling to learn we seem to be.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
The fall of the Berlin Wall: Reminiscence and reflection
Excerpts from remarks delivered at the Acton Institute annual dinner in Grand Rapids, Mich., on Oct. 29, 2009: Twenty years ago today, a growing tide of men and women in Eastern Europe and northern Asia were shaking off the miasma that had led so many to imagine that central economic planning could work. The socialist regimes of Eastern and Central Europe—accepted as ontological realities whose existence could not be questioned—were, well, being questioned. On November 4th, 1989, a million anti-Communist...
Acton Commentary: After the Berlin Wall — the Enduring Power of Socialism
The Economist marked the 20th anniversary of the fall of the Berlin Wall by observing that there was “so much gained, so much to lose.” As the world celebrates the collapse munism, who would have imagined that in less than one generation we would witness a resurgence of socialism throughout Latin America and even hear the word socialist being used to describe policies of the United States? We relegated socialism to the “dustbin of history,” but socialism never actually died...
Messianic Marxism
From “The Origin of Russian Communism” by Russian philosopher Nicholas Berdyaev (published by Geoffrey Bles, 1937): Marxism is not only a doctrine of historical and economic materialism, concerned with plete dependence of man on economics, it is also a doctrine of deliverance, of the messianic vocation of the proletariat, of the future perfect society in which man will not be dependent on economics, of the power and victory of man over the irrational forces of nature and society. There is...
Reflecting on Berlin
I was in the 8th grade in November of 1989, and I don’t think that the fall of the Berlin Wall had any immediate impact on my thinking at the time. I don’t remember if I watched the coverage on TV, or if there were any big discussions of the event in school during the following days. I was a history buff back then, to be sure – I still am – but I don’t think that I was engaged...
Secularism and Poverty
A colleague recently mentioned that a wag had observed the church had failed to solve poverty, so why not let the federal government have a try? I think it is interesting that anyone, such as the wag in question, could think that the federal government can effectively solve the problem of poverty. I don’t think it can because it resolutely refuses to confront the sources. Really, truly, don’t we know the cause of a great deal of the poverty in...
Acton Commentary: Government Health Care — Back to the Plantation
Black leaders constantly remind Americans of our racism. Should not these same leaders protest the expansion of government control contained in the health-care reform bill currently working its way through Congress? Here’s why. Notwithstanding their rhetoric of freedom and empowerment, many prominent black leaders appear content to send blacks back to the government plantation—where a small number of Washington elites make decisions for blacks who aren’t in the room. Why do minority leaders not favor alternatives that demonstrate faith in...
Veterans Day Review: As You Were
Washington Post reporter and author Christian Davenport has told a deeply raw and emotional story in his new book As You Were: To War and Back with the Black Hawk Battalion of the Virginia National Guard. This book does not focus on battlefield heroics but rather it captures the essence and value of the citizen- soldier. Most importantly this account unveils through narrative, the pride, the pain, and the harrowing trials of the life of America’s guardsmen and reservists. Davenport...
Economic Liberalism and its Discontents
How do we restore confidence in free markets? Formulate a robust explanation of their moral value. Read Economic Liberalism and its Discontents on Public Discourse. In his recent book The Creation and Destruction of Value, Princeton University’s Harold James observes that the 2008 financial crisis resulted in more than the devastation of economic value. It also facilitated a collapse of values in the sense of people’s faith in particular ideas, institutions, and practices. Among these, few would question that economic...
Communism as Religion
From the opening page of Lester DeKoster’s Communism and Christian Faith (1962): For the mysterious dynamic of history resides in man’s choice of gods. In the service of his god — or gods (they may be legion) — a man expends his mits his sacrifices, devotes his life. And history is made. Understand Communism, then, as a religion; or miss the secret of its power! Grasp the nature of this new faith, and discern in contrast to it the God...
Studying Stewardship in Scripture
This weekend’s Grand Rapids Press featured a story about the release of the NIV Stewardship Study Bible. Ann Byle writes, Three Grand Rapids-based organizations and numerous local residents joined forces recently to create a study Bible that focuses on stewardship. The Acton Institute, the Stewardship Council and Zondervan brought the NIV Stewardship Study Bible into print after more than five years of work that began with Brett Elder, the council’s executive director. Elder traveled the world speaking on generosity. He...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved