Antonio Foglia on the financial crisis
By Alberto Mingardi
“The global financial crisis that began in August 2007 resulted from a massive, unavoidable cognitive mistake on the part of regulators and bankers.” In a recent op-ed for Project Syndicate, Antonio Foglia made this point in “celebration” (not sure this is the right word) of the tenth anniversary of the financial crisis. Foglia, who is a banker but also a libertarian economist involved with a few think tanks, maintained that unfortunately the crisis taught us the wrong lessons: “regulators have piled on ever-more complex rules, and too-big-to-fail banks have become still bigger”. Foglia’s article echoes Jeffrey Friedman and Wladimir Kraus’s Engineering the Financial Crisis, to me still one of the best works on the crisis.
Antonio’s op-ed is well worth reading. I was particularly impressed by the causal link implied in this seemingly uncontroversial observation: “When banks enjoy extraordinary profitability even while playing by the rules, bankers assume that they are doing something right, and they compensate themselves accordingly. “.