SUBJECT INDEX
Page numbers in italics refer to figures and tables.
AAA rated securities, 8–10, 208, 259, 283n10
abortion, 282
ADA (Americans for Democratic Action), 46–47
adjustable-rate mortgages (ARMs), 21–22, 26, 138, 217, 299n59
African Americans (blacks), 44, 66, 118, 119, 198, 211, 244–45
agrarian interests (farmers and farms), 153, 155, 157–59, 162, 164, 166, 173–76, 179, 291n29
AHRFPA (American Housing Rescue and Foreclosure Prevention Act) of 2008, 64–65, 66, 189, 217–21, 219, 223, 300n62
AIG (American International Group): bonuses and, 36–37, 80, 230–31, 238; CDOs and, 3; CDSs and, 9, 142; directors of, 36–37; elites and, 272; equity investment returns and, 119, 120; federal investment and supervision of, 3, 4, 36–37, 158; federal supervision of, 222; global economy and, 125–26; insolvency of, 9–10; MBSs and, 3; mobilization against bonuses and, 80; OTS as regulator and, 139; populist backlashes against financial services industry and, 36–37, 286n14; public interest protection and, 23, 158; TARP and, 3
Aldrich-Vreeland Act of 1908, 11, 56–57, 160, 288n37
American Bankers Association, 82, 87–88
American Dream Downpayment Act of 2003, 117, 143, 144, 147, 148, 148, 294n38
American Recovery and Investment Act (stimulus package) of 2009. See stimulus package (American Recovery and Investment Act) of 2009
American Homeownership and Economic Opportunity Act of 2000, 143, 144, 147, 148
American International Group (AIG). See AIG (American International Group)
Americans for Democratic Action (ADA), 46–47
ARMs (adjustable-rate mortgages), 21–22, 26, 138, 217, 299n59
authority: in government, 6, 57, 91, 137, 271; of regulatory agencies, 113, 164, 169, 188; state governments and, 271
auto industry bailouts, 279
automatic stay exemption, 172, 296n37
automobile industry, 4, 217, 222, 234, 259–60, 263–64
Bain Capital, 278
Banking Act (Glass-Steagall Act) of 1933. See Glass-Steagall Act (Banking Act) of 1933
Banking Act of 1935, 169
Bank of America: acquisitions of, 3, 74, 125; campaign finance and, 80–81, 82; crisis of 2008 survivors and, 25; equity investment returns and, 119, 120, 121; political power of, 87–88; power of, 76–77; settlements and, 254
bankruptcy: agrarian interests and, 159, 166; automatic stay exemption and, 172, 296n37; Bankruptcy Act of 1800, 160, 166, 173, 179; Bankruptcy Act of 1841, 159, 160, 173–74, 176, 178–79; Bankruptcy Act of 1867, 173; Bankruptcy Act of 1898, 159, 160, 166, 173–76; Bankruptcy Reform Act of 1978, 100, 170, 175; derivatives and, 143, 172, 296n37; moral hazard and, 156, 159, 176; Orange County, CA, 12, 141; panics and, 155–57, 159, 160, 173–74; responses to laws on, 156, 159, 179, 295n4; transitions of power and, 173–75
banks. See financial services industry; specific businesses
Barclays, 88, 144, 155, 263, 277
Bear Stearns: equity investment returns and, 121; failure of, 6–7; federal bailout of, 3–4; political reasons for crisis of 2008 and, 6
Bernanke, Ben: appointment and confirmation to Fed and, 208, 215, 228–29, 229, 299n42; ideology and, 38, 40–41, 221; photograph of, 7; policies and, 40–41, 159, 215; political reasons for crisis of 2008 and, 5; TARP and, 214, 221, 253. See also Federal Reserve
bipartisanship, 5, 18, 85, 106, 118, 132, 182, 195, 298n19
blacks (African Americans), 44, 66, 118, 119, 198, 211, 244–45
Bonica, Adam, 304n14
bonuses: financial industry and, 23, 121; opportunities for reform and, 258, 264–65; populist responses to, 36–37, 72, 80, 230–31, 238; Wall Street and, 4, 113, 230–31. See also private sector; self-interest
Booker, Cory, 278
Born, Brooksley, 12, 28, 109, 140
bounded rationality, 32. See also psychology
Breuer, Lanny, 277
bubbles: bounded rationality and, 32; cognitive regulatory capture and, 34–35; definition of, 31, 285n2; delays in policy response and, 35–36; financial innovation and, 33–34; policy responses and, 33–35; pop of, 33, 35–36; populist backlashes against financial services industry and, 36–37, 286n14; populist responses to, 36–37, 286n14; predatory mortgage lending and, 26; psychology of decision making and, 32–33, 35–36. See also specific bubbles
Bunning, Jim, 279
Bush, George H. W., 4, 23, 130, 165, 178, 270
Bush, George W.: AHRFPA of 2008 and, 64–65, 66, 189, 217–21, 219, 223, 300n62; foreclosures and, 220–21; free market conservatism and, 5, 281; homeownership and, 43–44, 117, 143, 294n38; ideology and, 57; on interests, 71–72; median household incomes and, 121–22, 122; “ownership society” and, 5, 44, 126, 129, 143, 231, 293n13; photograph of, 7; political reasons for crisis of 2008 and, 4–5, 218; populist responses to crisis of 2008 and, 233, 300n6; privatization of social security and, 280; risky loan portfolios and, 43–44; stimulus plan of 2008 and, 198–201, 298nn20–22, 298n24; tax cuts, 279–80; Wall Street and, 72, 74; weak regulations and, 216
campaign finance, 78–85, 82, 84, 85, 225, 277–78, 289n15, 289n23, 300n67, 304n14
capitalism (free market capitalism), 16, 19, 40, 177–78, 269. See also crony capitalism; free market conservatism
Carter, Jimmy, 4, 129–30, 133–34, 137, 286n15
CDOs (collateralized debt obligations), 3, 9, 142, 145, 283n10, 295n15
CDSs (credit default swaps), 9, 10, 142
Center for Responsive Politics, 278
CFMA (Commodity Futures Modernization Act) of 2000, 11, 73, 109, 118, 143, 147, 242, 272
CFPA (Consumer Financial Protection Agency), 209–10, 299n46. See also Consumer Financial Protection Bureau
CFTC (Commodity Futures Trading Commission), 12, 18, 22, 87, 146, 146–47, 260, 272, 276, 281
Chandler Act of 1938, 170, 175
Citibank, 76–77, 80–81, 83, 87–88, 108
Citigroup: board members of, 183; campaign finance and, 82; CDOs and, 9; crisis of 2008 survivors and, 25; employees as political advisors and, 5; equity investment returns and, 121; Fannie Mae stock and, 130; federal investment and supervision of, 222; MBSs and, 9; misinformation and, 13; settlements and, 254; TARP funds and, 13
Citizens United v. Federal Elections Commission (2010), 150, 271
Clinton, Bill: delays in policy responses and, 109; Fed chair appointments and, 42; financial industry and, 106; financial innovation and, 34, 140; gridlock interval and, 102; homeownership and, 43, 117; median household incomes and, 121–22, 122; political advisors to, 5, 117, 184–85, 185; political reasons for crisis of 2008 and, 4–6; presidential pocket veto and, 94, 100; presidential veto and, 106; risky loan portfolios and, 43–44; weak regulations and, 216; welfare reform and, 280–81
cloture rules: institutions’ regulatory responses and, 98–100, 102–4, 290n19, 291n27; opportunities for reform and, 268, 303n24; political responses and, 180; pop of 2008 and, 199, 209, 211, 222
Club for Growth, 149, 192–93, 245
cognitive regulatory capture (cognitive state capture), 34–35, 115, 238
collateralized debt obligations (CDOs), 3, 9, 142, 145, 283n10, 295n15
Commodity Futures Modernization Act (CFMA) of 2000, 11, 73, 109, 118, 143, 147, 242, 272
Commodity Futures Trading Commission (CFTC), 12, 18, 22, 87, 146, 146–47, 260, 272
compensation packages. See bonuses
concentration in industries, 134, 144–47, 146, 255, 294n26
Consumer Bankers Association, 87–88
Consumer Financial Protection Agency (CFPA), 209–10, 299n46
Consumer Financial Protection Bureau, 150, 187, 198, 209–10, 256, 281, 299n46
Consumer Protection Act of 2010, 49, 77, 133
Corzine, Jon, 22, 260–61, 272. See also MF Global
Council of Economic Advisors, 5, 132, 295n10
Countrywide Financial, 19, 44, 73–74, 128, 131, 228, 254, 258
courts: elites and, 271; federal versus state governments and, 108–9, 186, 216–17, 299n58; policy role and, 107–9, 162, 294nn2–3, 295n18; predatory mortgage lending and, 108–9, 162, 295n18; Wall Street and, 108–9
CRA (Community Reinvestment Act) of 1977, 126, 129–30, 148
Credit Card Accountability Responsibility and Disclosure Act of 2009, 102, 207
credit cards, 6, 94, 100, 108, 166, 175, 196, 207, 299n43
credit default swaps (CDSs), 9, 10, 142
credit markets, in historical context, 155–60, 162, 164, 295n4, 295n10
Credit Suisse, 82, 144, 294n34
criminal prosecutions, 254, 266–67
crisis of 2008: summary of, 3–13; financial innovation and, 4, 285n2, 285nn2–3; free market conservatism and, 42–43; gridlock and, 60–61; historical context for, 11; ignored information and, 12–13, 156, 208, 258–59, 272; institutions in context of, 28–29; interests in context of, 27–28; moral hazard and, 42–43, 136–37; self-interest and, 4, 25–26, 285n3; self-regulation and, 27, 42; stimulus plan of 2008 and, 198–201, 298nn20–22, 298n24; weak regulations and, 8, 20, 26–27. See also political bubble of crisis of 2008; political reasons for crisis of 2008; pop of 2008; populist responses to crisis of 2008; specific laws
crony capitalism, 8, 18–19, 67, 131–32, 242, 270–71, 293n22. See also capitalism (free market capitalism)
Cuomo, Andrew, 43–44, 109, 186–87, 217, 287n18
Cuomo v. Clearing House Association (2009), 108–9, 186, 217
Davis Polk, 276
D.C. Court of Appeals, 276
delays in policy responses: bubbles and, 35–36; derivatives and, 10–12, 18, 99, 109, 140; Enron Corporation and, 110, 139–41; Federal Reserve and, 13; financial industry and, 109–11; Great Depression and, 11; historical context for, 160–65; ideology and, 16, 43; institutions and, 91, 94, 109; Lehman Brothers and, 16, 43, 284n24; Merrill Lynch and, 12; political reasons for crisis of 2008 and, 11–12; pop of 2008 and, 16, 149–51, 161, 188, 194, 200, 206, 297n4, 298n26; TARP and, 16
democracy, 17, 19, 35, 154, 228, 247, 268–69, 272–73, 302nn46–47. See also elections; specific political parties
Democratic Party: summary of, 268–69; agrarian interests and, 155, 173–74, 179; bankruptcy laws and, 173–74; campaign finance and, 83–84, 84, 162, 289n23, 295n16; campaign finance from financial industry to, 277; credit markets and politics in historical context and, 155; debt ceiling and, 279–80; egalitarianism and, 43; elections and, 252, 302n1; entitlement changes and, 280; financial industry and, 83–84, 84, 85, 93; financial industry in context of politics and, 162; financial regulation and, 279; financial supporters and, 280; foreclosures and, 218–21, 219, 301n21; free market conservatism and, 15, 42; gridlock interval and, 101; ideology and, 39–40, 224–25, 225; ideology scores and, 163, 190–94, 192, 193, 297nn14–16, 298n17; moral hazard and, 43; negative agenda control and, 96–98, 97; OWS and, 249; policy responses and, 238, 301n28; political reasons for crisis of 2008 and, 5–6; populist responses to crisis of 2008 and, 233–34, 300n7; predatory mortgage lending and, 11, 147; private sector failure and, 125; reversals of power and, 179–81; self-interest and, 18; strategic disagreement and, 105, 107; tax increases and, 280. See also liberal-conservative politics
Democrat-Republicans, 155, 157, 174, 226. See also Jeffersonianism
Depository Institutions Deregulation and Monetary Control Act of 1980, 136, 147
deregulation: summary of, 133–37; financial industry and, 41, 60, 108, 111–12, 139, 143–44, 147, 292n46; Gramm, Phil, and, 41, 73; health care industry regulations versus, 134, 135; homeownership and, 137–39, 294n30; political bubble of crisis of 2008 and, 123; populist responses to crisis and, 234; subprime and, 171
derivatives: automatic stay exemption and, 172, 296n37; bankruptcy and, 143, 172, 296n37; delays in policy response and, 10–12, 18, 99, 109, 140; deregulation and, 133, 143, 147; information from lobbyists and, 86; limited policy responses and, 171–72, 296n37; policy responses and, 105, 189, 209, 210, 299n44; predatory mortgage lending and, 141
Dimon, Jamie, 22, 150, 169. See also JPMorgan Chase
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: summary of, 20, 187–88, 194, 254; cloture and, 241; complexity of, 259; complexity of regulations and, 188, 256–58; delays in policy response and, 188, 257–58, 297n4; derivatives and, 209, 299n44; filibuster and, 195–96, 210, 261; financial regulations and, 275; financial services industry and, 77, 187–88; gridlock interval and, 102; GSEs reform and, 133; implementation of, 275; legal challenges to, 275; liberal-conservative politics and, 49–50, 57, 195–98, 208–14, 275, 299n45; Libor scandal and, 278; limited policy responses and, 187–89, 255–56, 261; lobbyists and, 67, 77, 258, 281; Miller Bill of 2007 and, 141, 193–94, 216; pivotal politics and, 150, 195, 208–14, 212, 213, 299nn46–50; post-election, 281; public support for, 237; reforms of, 281; Romney and, 275, 278–79; “skin in the game” and, 257; “too big to fail” and, 254–55, 265–66, 275; UBS and, 277; Volcker Rule and, 210
dot-com bubble of 2001, 13, 32–33, 173
drug industry, regulation of, 282
EESA (Emergency Economic Stabilization Act) of 2008, 222–23. See also TARP (Troubled Asset Relief Program) of 2009
egalitarianism: summary of, 19, 43–45, 287n18, 287n20; Fannie Mae and, 19, 44; homeownership and, 19, 44, 126, 128–29, 292n6
Eisenhower, Dwight D., 270, 271
elections: campaign finance and, 304n14; Dodd-Frank and, 277–78; electoral cycle and, 91, 290n1; financial industry and, 277–78; financial sector and, 78–79, 289n11; mobilization of constituencies and, 75–80, 77, 78, 80, 279, 289n9; opportunities for reform and, 252; pop of 2008 and, 80, 194–95, 203–6, 205, 215, 223, 225–27, 226; populist responses to crisis and, 230; presidential debates, 275; regulatory responses and, 91, 290n1; short-termism and, 181–83; taxes and, 279–80; third-party politics and, 249, 267–69, 303n26
electric power (energy) markets, 73, 134–35, 143, 165, 218, 284n27
electronics industry, 133–35, 143
elites, and financial industry, 22–23, 74–75, 242, 271–73, 285nn38–39
Emanuel, Rahm, 54, 75, 183, 251, 253
Emergency Economic Stabilization Act (EESA) of 2008, 222–23
Employee Retirement Income Security Act (ERISA) of 1974, 110
employment, 275
energy (electric power) markets, 73, 134–35, 143, 165, 218, 284n27
Enron Corporation: board members of, 18, 183; concentration in industries and, 173; delays in policy response and, 110, 139–41; elite as implicated in financial bubbles and, 22; elites and, 271; energy industry and, 135; energy markets and, 284n27; “Enron loophole” and, 18, 73, 110, 242; misinformation and, 13; regulations and, 18, 63, 73, 242; scandal and, 22, 173
entitlements, changes to, 280
environment, 282
equity: dot-com, 173; equity investments and, 41, 118–21, 120, 158, 292n1, 295n10; homeownership and, 2, 28
ERISA (Employee Retirement Income Security Act) of 1974, 110
estate tax, 279
executive branch: appointments and, 150, 294n4; elites and, 271; formal/informal legislative powers of, 100, 290n20; opportunities for reform and, 252–53, 302n1; pocket veto and, 94, 100; political reasons for crisis of 2008 and, 4–5; populist responses to crisis and, 233–34, 300n6; veto and, 100–105, 103, 290n21
executive compensation. See bonuses
Fannie Mae: bipartisanship and, 132; directors of, 5, 186; egalitarianism and, 19, 44; equity investment returns and, 121; federal supervision of, 4, 188, 222; future of, 276; interests within, 132–33, 293n22; misinformation and, 5, 13, 36, 262–63, 303n9; opportunities for reform after crisis and, 256; policy responses and, 217–18; privatization of, 118, 123, 129–33, 136, 222, 239, 293n17; regulatory measures and, 10–11; risky loan portfolios and, 13, 43–45, 130, 287n18, 287n20
farmers and farms (agrarian interests), 153, 155, 157–59, 162, 164, 166, 173–76, 179, 291n29
Federal Deposit Insurance Corporation (FDIC), 130, 132, 146, 147, 281
federal government: authority in, 6, 57, 91, 137, 271; bailouts by, 3–4; corporation supervision by, 3, 4, 36–37, 158; financial innovation and, 142–44, 294n38; populist responses to intervention of, 234–39, 236, 300nn11–12, 301n21, 301nn23–24, 301n28, 301n31, 301nn33–34, 301nn36–37; power of, 91–92, 94, 96; regulatory capacity and, 266; trust in, 282. See also specific branches of government
Federal Home Loan Bank Board (FHLBB), 164, 167, 170, 177
Federal Reserve: delays in policy response and, 13, 160; Federal Reserve Act of 1913 and, 11, 20, 57, 160, 166–69, 168, 176–78, 288n37; housing bubble and, 9; intervention by, 12; polarization and, 167–69; political reasons for crisis of 2008 and, 4–5, 139. See also specific chairmen
Federal Reserve Bank (FRB), 281
FHLBB (Federal Home Loan Bank Board), 164, 167, 170, 177
filibuster: institutions and, 98–100, 102–4, 103, 291nn27–28; pop of 2008 and, 189, 194–96, 205, 210, 220–21, 261
financial bubbles: democracies and, 19, 285n35; elite as implicated in, 22–23, 285nn38–39; gridlock and, 17, 59; ideology and, 16; institutions and, 16–17; political bubbles as compared with, 16–19; self-interest and, 17–18
financial crises. See crisis of 2008; panics
financial industry: authority of regulatory agencies and, 169; bipartisanship and, 18, 85, 106, 182; campaign finance and, 81–82, 82, 84, 85, 150, 162, 225, 277–78, 294nn2–3, 295n16, 300n67, 304n14; complexity of, 113, 258–59; complexity of regulations and, 80, 197, 256–57; concentration of, 280; confidence in, 282; courts and, 107–8, 277; crime and, 277; delays in policy response and, 109–11; Democratic Party and, 83–84, 84, 85, 93; deregulation and, 41, 60, 108, 111–12, 139, 143–44, 147, 292n46; elites and, 22, 271–73; enforcement and, 282; executive branch regulatory responses to, 111–12; federal versus state governments and, 216–17, 299n58; financial amnesia and, 282; fines of, 277; liberal-conservative politics and, 62–67, 195–98; localism and, 92–93; market regulations and, 279; as the “money-wing” and, 278; opportunities for reform and, 251–53; OWS and, 249; politics and, 162, 295n15; populist responses to crisis and, 233–34, 300n6; power of interests and, 78–80, 81–82, 82, 289n20, 289nn11–13; reform of, 207–14, 212; reforms and, 163, 281–82, 296n19; regulatory capacity and, 112–15, 292n52; Republican Party and, 80, 83–85, 85; self-interest and, 282; settlements and, 254; state governments and, 59, 108–9, 216–17, 299n58; strategic disagreement and, 106; “too big to fail” and, 43, 123–24, 139, 150, 241, 254–55, 265–66, 282, 303n10; weak regulations and, 64, 74, 141. See also self-regulation; Wall Street; specific laws and industries
financial innovation: summary of, 20–23, 294n38; bubbles and, 33–34; crisis of 2008 and, 4, 285n2, 285nn2–3; homeownership and, 140–42; housing bubble and, 5, 9–10, 13; ideology and, 140–44, 285nn38–39, 294n34, 294n38; institutions and, 140–44, 294n34, 294n38; interests and, 140–44, 294n34, 294n38; political reasons for crisis of 2008 and, 8; self-regulation and, 21
financial regulations: Dodd-Frank and, 275; implementation of, 276; market regulations and, 279
financial services industry: campaign finance and, 83, 84; credit cards and, 6, 94, 100, 108, 166, 175, 196, 207, 299n43; credit markets in historical context and, 155–60, 162, 164, 295n4, 295n10; financial innovation and, 34; foreclosures and, 221, 300n63; GSEs and, 255–56; limited policy responses and, 166, 296n27; limits on, 264; localism and, 166; moral hazard and, 237; power of, 6–7, 76–78, 77, 81; shadow banking system and, 9–10, 21, 155, 221; “too big to fail” and, 124, 150, 255, 265–66, 303n10; weak regulations and, 20, 22, 74, 111, 164, 216, 261. See also savings and loan crisis (S&L) of 1985
Financial Stability Oversight Council (FSOC), 281
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) of 1989, 20, 139, 147, 165, 170–71, 178, 182, 216. See also OTS (Office of Thrift Supervision)
fiscal cliff, 279
fiscal policy: polarization of, 279; reform, 280
food industry, regulation of, 282
foreclosures: bankruptcy and, 158, 218–19, 219; crisis of 2008 and, 35, 41; fraudulent processing of, 277; limited policy responses and, 189–90; limits on financial services industry and, 264; MBSs and, 221, 300n63; policy responses and, 64–65, 66, 189, 217–21, 219, 223, 300nn62–63; populist responses to crisis and, 233, 236–37, 301n21; predatory mortgage lending and, 244; “robo-signing” of, 26, 256, 285n2; settlements and, 254; statistics on, 190; subprime mortgages and, 13. See also homeownership
France, 280
FRB. See Federal Reserve Bank
Freddie Mac: bipartisanship and, 132; CEOs of, 5, 73–74, 185; equity investment returns and, 121; federal supervision of, 4, 188, 222; future of, 276; history of, 129; interests within, 132–33, 293n22; misinformation and, 13, 36, 262–63, 303n9; opportunities for reform after crisis and, 256; policy towards, 133; privatization of, 123, 130–31, 133, 222, 239, 293n17; risky loan portfolios and, 13, 43–45, 130, 287n18, 287n20
free market capitalism (capitalism), 16, 19, 40, 177–78, 269
free market conservatism, 281; crisis of 2008 and, 42–43, 193; homeownership and, 43–44; ideology and, 40, 41, 42–43, 270, 286n12; limited government responses and, 15, 42, 58; moral hazard and, 208, 225; “ownership society” and, 5, 44, 126, 129, 143, 231, 293n13; political bubbles and, 15–16, 18–19
Frontline, 277
FSLIC (Federal Savings and Loan Insurance Corporation), 136, 164–65, 181–82
FSOC. See Financial Stability Oversight Council
Fuld, Richard, 6, 169, 265, 296n32
fundamentalist free market capitalism, 16, 177–78
Garn-St. Germain Depository Institutions Act of 1982, 21, 138, 147
gay rights, 282
Geithner, Timothy, 185, 185, 187, 189, 286n14
General Motors (GM), 4, 222, 259–60
Gensler, Gary, 22, 150, 260–61
geographical representation, and institutions’ regulatory responses, 92–94, 290n9
Glass, Carter, 104, 167, 296n19
Glass-Steagall Act (Banking Act) of 1933: summary of, 11, 256, 259, 291n29; filibuster and, 104, 291n28; financial services industry and, 81, 105, 163, 165–66, 170; ideology and, 57; localism and, 11, 92; repeal of, 18, 34, 74, 111–12, 147, 292n46, 294n3. See also Gramm-Leach-Bliley Act of 1999
GM (General Motors), 4, 222, 259–60
Goldman Sachs: board members of, 74, 183, 186, 293n22; bonuses and, 121; campaign finance and, 80–81, 82–83, 84, 289n23; crisis of 2008 survivors and, 25, 144; elites and, 272; equity investment returns and, 119–21, 120; financial innovation and, 86–87, 144; information from lobbyists and, 88; settlements and, 254
government regulations, of food and drug industries, 282
Gramm, Phil: connections to UBS, 277; deregulation and, 41, 73; as political advisor, 12, 183; private sector and, 183; self-interest and, 17–19
Gramm-Leach-Bliley Act of 1999, 18, 34, 41–42, 143, 147, 272. See also Glass-Steagall Act (Banking Act) of 1933
Great Depression: credit markets and politics in historical context and, 157, 159, 295n10; delays in policy response and, 11, 161–63; financial industry in context of politics and, 162; government housing programs and, 128; legislation after, 11, 161–63, 291n29; policy responses to, 19–20, 40–41, 165; transitions of power and, 177
Great Recession of 2007 to 2009, 2, 6, 104, 118, 177, 228, 251, 272
greed. See self-interest
Greenspan, Alan: delays in policy response and, 109; Fed chair appointment of, 42, 286n15; financial innovation and, 34; free market conservatism and, 16, 41–43, 286n12; limited policy responses and, 172; political bubble of crisis of 2008 and, 118; political reasons for crisis of 2008 and, 5; regulatory capacity and, 123; self-regulation and, 27, 41; “too big to fail” and, 265. See also Federal Reserve
gridlock (paralysis): crisis of 2008 and, 60–61; financial bubbles and, 17, 59; gridlock interval and, 100–103, 103, 291nn23–24; institutions’ regulatory responses and, 91, 94, 96, 100–101, 109–12, 290n15, 290n21, 291nn23–24, 292n46; pop of 2008 and, 102
GSEs (government-sponsored enterprises), 3–4, 255–56; future of and, 276; post-election, 281. See also Fannie Mae; Freddie Mac
HAMP (Home Affordable Modification Program) of 2009, 189–90
HARP (Home Affordable Refinance Program) of 2012, 190
health care industry: health care reform and, 181, 241, 241–43, 252; lobbyists and, 290n30; Obamacare of 2010 and, 102, 230, 241, 243–45, 247, 259; OWS and, 249; populist responses to laws on, 297n49; power of interests and, 76, 77; reforms in, 48, 181, 195–96, 241, 241–43, 250, 251–52; regulations and, 142–43; regulation versus deregulation and, 134, 135
high-frequency trading (HFT), 276
HOEPA (Home Ownership and Equity Protection Act) of 1994, 216
Holbrooke, Richard, 22–23, 73–74, 118
Hollande, François, 280
Home Affordable Modification Program (HAMP) of 2009, 189–90
Home Affordable Refinance Program (HARP) of 2012, 190
homeownership: summary of, 117–18, 119, 190; bankruptcy and, 158, 166; credit markets and politics in historical context and, 157–59; deregulation and, 137–39, 294n30; egalitarianism and, 19, 44, 126, 128–29, 292n6; equity and, 2, 28; financial innovation and, 140–42; free market conservatism and, 43–44; Great Depression and, 128; income tax deductions and, 127; institutions and, 131–32; interests of real estate industry and, 126–28, 131, 292n6; minorities and, 43, 44, 117, 118, 119, 130, 148; off-budget subsidies and, 126–33; “ownership society” and, 5, 44, 126, 129, 143, 231, 293n13; the poor and, 5, 45, 137, 143–44, 218; predatory mortgage lending and, 141; private sector and, 126; redlining and, 130, 148; securitization and, 8–9; state governments and, 13, 127, 137, 139, 141. See also foreclosures; mortgages; political bubble of crisis of 2008; predatory mortgage lending; specific mortgage products
Home Ownership and Equity Protection Act (HOEPA) of 1994, 216
Hoover, Herbert, 40–41, 57, 153, 161, 162, 167, 177
Housing and Community Development Act of 1992, 130, 148
Housing and Economic Recovery Act of 2008. See AHRFPA (American Housing Rescue and Foreclosure Prevention Act) of 2008
housing bubble, 275–76; summary of, 1–3, 35, 286n12; equity and, 28; financial innovations and, 5, 9–10, 13; ideology and, 215–21; liberal-conservative politics and, 218–21, 219, 300n62; pop of, 9–10, 33, 215–21; predatory mortgage lending and, 193–94, 216–17, 299n59, 301n21; psychology of decision making and, 33. See also real estate industry
HSBC, 277
ideal points, 48, 52, 53, 54, 62, 65–70. See also ideology scores
ideology: summary of, 38–45; behavioral definition of, 45; capitalism and, 40; crisis of 2008 and, 228; crony capitalism and, 67; definition of, 38, 39, 45; delays in policy response and, 43, 154; Democratic Party and, 39–40; financial bubbles and, 16; free market conservatism and, 40, 41, 42–43, 286n12; impact of, 280; limited regulations and, 154; moral hazard and, 42–43, 57; opportunities for reform and, 257, 269–70; OWS and, 249; partisan overlap and, 50, 52, 98; polarization and, 47, 50, 53, 54, 57–62, 58, 61, 288n37; policy response and, 40–41; political bubble of crisis of 2008 and, 118, 123; political bubbles and, 15–16, 18–19, 284n22, 284n33; political reasons for crisis of 2008 and, 7–8, 29, 283n7; political responses and, 150–51; pop of 2008 and, 39–40, 57, 67, 196–98, 215–27, 219, 224–25, 226, 227; Republican Party and, 39–40, 279; reversals of power and, 179; self-regulation and, 41, 42, 286n12; tracking techniques and, 69, 288n48; Wall Street and, 27, 113, 124. See also ideal points; liberal-conservative politics; specific ideologies
ideology scores: Bernanke’s reappointment to Fed and, 208, 228–29, 229, 299n42; Democratic Party and, 163; liberal-conservative politics and, 47–49, 52–58, 53, 54, 61, 69, 288n48; pop of 2008 and, 190–94, 192, 193, 297nn14–16, 298n17; Republican Party and, 163. See also ideal points; ideology
ignored information, and crisis of 2008, 12–13, 156, 208, 258–59, 272
inaccurate information (misinformation), 5, 12–13, 25, 36, 239, 262–63, 284n15, 284n17, 303n9
institutions, 280; summary of, 90–94, 115–16; authority in government and, 91; cloture rules and, 98–100, 102–4, 290n19, 291n27; cognitive regulatory capture and, 115, 225; courts and, 107–9; crisis of 2008 and, 228; crisis of 2008 in context of, 28–29; delays in policy response and, 91, 94, 109, 154; electoral cycle and, 91, 290n1; filibuster and, 98–100, 102–4, 103, 291nn27–28; financial bubbles and, 16–17; geographical representation and, 92–94, 290n9; gridlock and, 91, 94, 96, 100–101, 109–12, 290n15, 290n21, 291nn23–24, 292n46; gridlock interval and, 100–103, 103, 291nn23–24; homeownership and, 131–32; limited policy responses and, 150; limited regulations and, 154; localism and, 91–92, 136–37; negative agenda control and, 96–98, 97, 102, 290n15; pivotal politics and, 94–100, 97, 105, 111; polarization and, 90, 104, 110–11; political bubble of crisis of 2008 and, 118, 123; political bubbles and, 16–17; political reasons for crisis of 2008 and, 7, 8, 29, 283n8; political responses and, 150–51; power of federal government and, 91–92, 94, 96, 100; power of regulatory agencies and, 108–9, 114; power to block reforms in homeownership and, 131–32; presidential formal/informal legislative powers and, 100, 290n20; presidential pocket veto and, 94, 100; presidential veto and, 100–105, 103, 290n21; reform trap and, 114; regulatory capacity and, 112–15, 292n52; regulatory responses and, 20, 111–12, 292n46; reversals of power and, 179; strategic disagreement and, 105–7; weak regulations and, 20, 139
insurance industry, 77, 78–79, 81–82, 82, 290n30; campaign contributions and, 277; risk, 281. See also specific companies
interests: summary of, 71–75; crisis of 2008 and, 27–28, 228; delays in policy response and, 154; entitlement changes and, 280; within Fannie Mae, 132–33, 293n22; financial innovation and, 140–44, 294n34, 294n38; within Freddie Mac, 132–33, 293n22; information from lobbyists and, 87; limited regulations and, 154; lobbyists and, 73; OWS and, 249; policy response and, 73; political bubble of crisis of 2008 and, 118, 123; political reasons for crisis of 2008 and, 7, 8, 29, 74–75; political responses and, 150–51; real estate industry and, 126–28, 131, 292n6; Republican Party, 279; reversals of power and, 179
Jefferson, Thomas, 155, 173–74
Jeffersonianism, 173–74, 179, 271, 294n26
Jesus Christ, 282
Johnson, James, 5, 73–74, 132, 186, 293n22
JPMorgan Chase, 276; acquisitions of, 149–50, 159–60; authority of regulatory agencies and, 169; campaign finance and, 80–81, 82; CDOs and, 142; CDSs and, 142; complexity of regulations and, 257; directors of, 22; elites and, 22; political power of, 76–77, 87–88; settlements and, 254
League of Conservation Voters (LCV), 46–47
Lehman Brothers, 304n4; bankruptcy and, 3, 6, 16, 43, 57, 166, 173; campaign finance and, 6, 80–81; delays in policy response and, 16, 43, 284n24; equity investment returns and, 121; failure of, 3, 6–7, 16, 43, 57, 284n24; misinformation and, 284n17; political reasons for crisis of 2008 and, 6
Lehrer, Jim, 275
liberal-conservative politics: summary of, 45–47, 287nn25–27; financial issues voting records and, 62–67, 63, 65, 288nn46–47; ideal points and, 48, 52, 53, 54, 62, 65–70; ideological map and, 67–70, 68, 69; ideology scores and, 47–49, 52–58, 53, 54, 61, 69, 163, 288n48; one-dimensional politics and, 49; opportunities for reform and, 251–52; patterns in voting and, 49–52, 51, 53, 54, 54–57, 288n37, 288nn34–35; pop of 2008 and, 52, 54, 54, 57, 195–207, 202, 203, 205, 208, 222–26, 224–25, 226, 298nn29–32; spatial model of voting and, 47–48, 51, 62–68, 63, 65, 66, 288nn46–47; tracking ideology techniques and, 45, 49, 61; weak regulations and, 64, 111. See also ideology
Libor scandal: Barclays and, 277; fines and, 277–78; media attention and, 277; UBS and, 277–78; Wall Street Journal and, 278
limited policy responses: opportunities for reform and, 255–56; political bubble pop and, 160, 165–73, 168; pop of 2008 and, 184–89, 194, 200, 217
lobbyists: Dodd-Frank and, 281; financial industry, 87–89, 88, 291n30; information from, 85–87; insurance industry and, 291n30; interests and, 73; pop of 2008 and, 67
localism, 244, 264, 271; institutions’ regulatory responses and, 91–92, 136–37; political responses and, 166–67; pop of 2008 and, 215
Long Term Capital Management (LTCM), 12, 21, 22, 141, 144, 171–72, 285n39
Madoff, Bernard, 26, 73, 170, 285n3
Marquette National Bank of Minneapolis v. First Omaha Service Corp. (1978), 108
MBSs (mortgage-backed securities): AAA rated, 9, 283n10; summary of, 4, 283; foreclosures and, 221, 300n63; housing bubble pop and, 9–10; private sector and, 131, 139, 141–42, 218, 294n34; self-interests and, 141–42, 294n34; “skin in the game” and, 141, 188–89, 294n34
McCain, John, 19, 41, 55, 93, 200, 214, 230, 277
median household incomes, 121–23, 122
Medicare: reform, 281; vouchers, 280
Mellon, Andrew, 41, 153, 161, 162, 177, 223–24, 286n9
Merrill Lynch: acquisition of, 3, 125, 149–50; delays in policy response and, 12; failure of, 6–7, 12, 171; investors and investments, 14, 25, 171; on largest bank list, 145; misinformation and, 12, 13, 25
MF Global, 22, 150, 260–61, 276
Miller, Brad, 141, 193–94, 216
Miller Bill (Mortgage Reform and Anti-Predatory Lending Act of 2007), 141, 193–94, 216
minorities, and homeownership, 43, 44, 117, 118, 119, 130, 148
misinformation (inaccurate information), 5, 12–13, 25, 36, 239, 262–63, 284n15, 284n17, 303n9
MMFs. See money market funds
mobilization of constituencies, 75–80, 77, 78, 289n9
money market funds (MMFs), 276, 304n4
moral hazard: bankruptcy and, 156, 159, 176; bankruptcy laws and, 176; crisis of 2008 and, 42–43, 136–37; financial services industry and, 237; free market conservatism and, 208, 225; ideology and, 42–43, 57; mortgages and, 158, 236; populist responses to crisis and, 233; TARP and, 57
Morgan, J. Pierpont, 56, 155–56, 176
Morgan Stanley, 25, 119–21, 120
mortgage-backed securities (MBSs). See MBSs (mortgage-backed securities)
Mortgage Reform and Anti-Predatory Lending Act of 2007 (Miller Bill), 141, 193–94, 216
mortgages: complexity of contracts for, 139, 221; limited policy responses and, 189–90; market concentration of, 276; moral hazard and, 158, 236; opportunities for reform and, 257; private sector and, 125–26, 158, 189, 218; tax deductions and, 127, 294n26. See also homeownership; MBSs (mortgage-backed securities); predatory mortgage lending; subprime mortgages and crisis
Mozilo, Angelo, 19, 44, 73–74, 128, 131, 228, 254, 258
mutual funds, 282
National Banking Act of 1956, 92, 167
National City Corporation, 1–3, 124, 149, 233
National Consumer Bankruptcy Coalition, 81, 94
nationalization, 131, 222, 239
NAV. See net asset value
negative agenda control, 96–98, 97, 102, 290n15
net asset value (NAV), 304n4
New York Federal Reserve, 6, 21, 113, 144, 167–69, 172, 185
Obama, Barack: Bain Capital and, 278; bipartisanship and, 195, 298n19; campaign finance and, 278, 304n14; Congressional service, 54; connections to UBS and, 277; debt ceiling and, 278; Dodd-Frank and, 278; elections and, 279; filibuster hurdle and, 104–5, 205; financial industry and, 72, 74, 162, 186, 238, 295n15, 301n30; financial regulation and, 275; on interests, 71–72; legislation hurdles under, 161, 163, 291n29; opportunities for reform after crisis and, 252–53; polarization and, 195; policy responses and, 105, 291n29; political advisors and, 184–86, 185; political battles of, 277; political reasons for crisis of 2008 and, 4–5; populist responses to crisis of 2008 and, 233–34, 300n6; self-interest and, 18; Wall Street and, 253–54. See also stimulus package (American Recovery and Investment Act) of 2009
Obamacare (Patient Protection and Affordable Care Act) of 2010, 102, 230, 241, 243–45, 247, 259, 276
OCC (Office of the Comptroller of the Currency), 28–29, 216–17, 281
Occupy Wall Street (OWS), 149, 231–32, 246–50, 257, 259, 302n43, 302nn51–53
off-budget subsidies, 126–33, 218, 271
Office of the Comptroller of the Currency (OCC), 28–29, 216–17
Office of Management and Budget (OMB), 5, 117, 185
one-dimensional politics, 49, 287n27
opportunities for reform after crisis: summary of, 260, 261–62; bonuses and, 258, 264–65; cloture rules and, 268, 303n24; complexity of financial industry and, 258–59; criminal prosecutions and, 254, 266–67; elections and, 252; executive branch and, 252–53, 302n1; financial industry and, 251–53; GSEs and, 255–56; ideology and, 257, 269–70; liberal-conservative politics and, 251–52; limited policy responses and, 255–56; limits on financial services industry and, 264; MF Global failure, 260–61; mortgages and, 257; political reforms and, 267–73, 303nn23–24, 303n28; political risk factor and, 262–63; regulatory capacity and, 266–67; settlements and, 254; simplification of regulations and, 262; state governments and, 266, 271; “too big to fail” and, 265–66; Wall Street and, 253–54
Orszag, Peter, 5, 75, 132, 183, 185, 262, 291
OTS (Office of Thrift Supervision), 20, 139, 170, 216. See also FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) of 1989
“ownership society,” 5, 44, 126, 129, 143, 231, 293n13
OWS (Occupy Wall Street), 149, 231–32, 246–50, 257, 259, 302n43, 302nn51–53
Oxley, Michael, 62–63, 173. See also Sarbanes-Oxley Act of 2002
panics: Panic of 1907 and, 11, 56, 160, 166–69, 176; political responses and, 153, 155, 156–57, 160; as recurrent, 11–12, 58–59; transitions of power and, 174, 176–77
paralysis (gridlock). See gridlock (paralysis)
Patient Protection and Affordable Care Act (Obamacare) of 2010, 102, 230, 241, 243–45, 247, 259, 276
Paulson, Henry: delays in policy response and, 16, 111, 284n24; financial industry and, 214–15, 223–26, 253, 289n23; financial innovation and, 90, 111, 144, 264; moral hazard and, 43; policy responses and, 159, 255; political bubble of crisis of 2008 and, 7, 125–26; self-regulation and, 90, 111, 285n4. See also TARP (Troubled Asset Relief Program) of 2009
“pay as you go” rules, 199, 298n20
PBS. See Public Broadcasting Service
pension funds: public and private, 282; state government, 281
personal bankruptcy law, 6, 66, 81, 94, 100
pivotal politics: institutions’ regulatory responses and, 94–100, 97, 105, 111; pop of 2008 and, 150, 195, 198–207, 202, 203, 205, 210–14, 212, 213, 299nn46–50
PNC Bank, 2, 124, 149, 233, 266
polarization: of fiscal policy, 279; ideology and, 47, 50, 53, 54, 57–62, 58, 61, 288n37; institutions’ regulatory responses and, 90, 104, 110–11; pop of 2008 and, 133, 195, 200, 206; transitions in politics and, 154
policy-making institutions. See institutions
policy responses: bubbles and, 33–35; complexity of, 80, 188, 196–97, 204, 256–57; executive branch and, 111–12; financial industry and, 111–12; free market conservatism and, 15, 27, 42; Great Depression and, 19–20, 40–41, 128; gridlock and, 154; historical context and, 159–60; ideology and, 15, 27, 40–41, 57; interests and, 73; political reasons for crisis of 2008 and, 10–11; predatory mortgage lending and, 11, 13, 108–9, 147; simplification of, 262. See also delays in policy response; institutions; weak regulations; specific laws and regulations
political bubble of crisis of 2008: summary of, 29, 117–26, 292n1; bipartisanship and, 5, 118; concentration in industries and, 134, 144–47, 146, 255, 294n26; crony capitalism and, 131–32, 293n22; deregulation and, 123; equity investments and, 41, 118–21, 120, 292n1; global economy and, 125–26; homeownership and, 117; median household incomes and, 121–23, 122; private sector and, 4–5, 125, 301n37; regulatory capacity and, 123, 145–47, 146; self-regulation and, 125; self-regulatory financial market and, 140; whites’ median household incomes and, 122, 122–23. See also crisis of 2008; deregulation; homeownership; political reasons for crisis of 2008
political bubbles, 14–19, 284n22, 284n33. See also ideology; institutions; interests; political bubble of crisis of 2008
political elections. See elections
political reasons for crisis of 2008: summary of, 29; capitalism and, 19; CDSs and, 9, 10; crony capitalism and, 8; delays in policy response and, 11–12; democracy and, 19; financial innovation and, 8; ideology and, 7–8; ideology in context of, 29, 283n7; ignored information and, 12–13; institutions, 7, 8, 283n8; institutions and, 7, 8, 29, 283n8; interests and, 7, 8, 29, 74–75; misinformation and, 12–13, 284n17; opposition to reforms and, 12–13; predatory mortgage lending and, 11; recurrent financial crises, 11–12; regulatory measures and, 10–11; securitization and, 8–9. See also crisis of 2008; political bubble of crisis of 2008
political responses: summary of, 150–51, 183; bankruptcy laws and, 156, 159, 295n4; cloture rules and, 180; credit markets in historical context and, 155–60, 295n4; delays in historical context and, 160–65; historical evidence for, 58, 153–54; limited policy responses and, 160, 165–73, 168; localism and, 166–67; panics and, 153, 155, 156–57, 160; reconciliation process and, 161, 295n14; reversals of power and, 178–81, 180; short-termism and, 181–83; transitions in politics and, 173–78
politics: bipartisanship and, 5, 18, 85, 106, 118, 132, 182, 195, 298n19; bubbles and, 14–19, 284n22, 284n33; political reforms and, 267–73, 303nn23–24, 303n28; political risk factor and, 262–63. See also ideology; institutions; interests; political bubble of crisis of 2008; political reasons for crisis of 2008; political responses
the poor, and homeownership, 5, 45, 137
pop of 2008: summary of, 149–51, 184–90, 222, 227; bipartisanship and, 195, 298n19; campaign finance and, 85, 225, 300n67; cloture rules and, 199, 209, 211, 222; delays in policy response and, 16, 149–51, 161, 188, 194, 200, 206, 297n4, 298n26; elections and, 80, 194–95, 204–6, 205, 215, 223, 225–27, 226; Europe and, 206, 299n41; filibuster and, 189, 194–96, 205, 220–21; funds for acquisitions, 2; gridlock interval and, 102; ideology and, 39–40, 57, 67, 196–98, 215–27, 219, 224–25, 226; ideology scores and, 190–94, 192, 193, 297nn14–16, 298n17; liberal-conservative politics and, 52, 54, 54, 57, 195–207, 202, 203, 205, 208, 222–26, 224–25, 226, 298nn29–32; limited policy responses to, 184–89, 194, 200, 217; lobbyists and, 67; localism and, 215; mobilization of constituencies and, 80; “pay as you go” rules and, 199, 298n20; pivotal politics and, 150, 195, 198–207, 202, 203, 205, 210–14, 212, 213, 299nn46–50; polarization and, 133, 195, 200, 206; populist responses to, 204–5, 298n35; predatory mortgage lending and, 193–94, 216–17, 301n21; state governments and, 206, 216, 299n40; stimulus plan of 2008 and, 198–201, 298nn20–22, 298n24; taxes and, 298n24; transitions in politics and, 194, 201, 206; Wall Street and, 184, 186. See also crisis of 2008; opportunities for reform after crisis; political responses; populist responses to crisis of 2008; TARP (Troubled Asset Relief Program) of 2009; specific laws
populist responses to crisis of 2008: summary of, 149, 151, 228–33, 229, 249–50; bonuses and, 36–37, 72, 80, 230–31, 238; bubbles and, 36–37, 286n14; cognitive regulatory capture and, 238; Congress and, 233–34, 300n6; deregulation and, 234; elections and, 230; equity investments and, 158, 295n10; executive branch and, 233–34, 300n6; federal intervention and, 234–39, 236, 300nn11–12, 300n21, 301nn23–24, 301n28, 301n31, 301nn33–34, 301nn36–37; financial industry and, 233–34, 300n6; foreclosures and, 233, 236–37, 301n21; moral hazard and, 233; OWS and, 149, 231–32, 246–50, 257, 259, 302n43, 302nn51–53; pop of 2008 and, 204–5, 298n35; predatory mortgage lending, 244, 256; TARP and, 234–37, 236, 300nn11–12; Wall Street and, 230–33, 235, 300n6. See also crisis of 2008; Tea Party
power: of federal government, 91–92, 94, 96, 100; of regulatory agencies, 108–9, 114; reversals of, 178–81, 180; transitions in politics and, 154, 173–78, 194, 201, 206
power of interests: summary of, 75; campaign finance and, 80–85, 82, 84, 85, 225, 289n15, 289n23, 300n67; financial industry and, 78–80, 81–82, 82, 289n20, 289nn11–13; financial services industry and, 76–78, 77, 81; health care industry and, 76; information from lobbyists and, 85–87; legal profession and, 81, 289n20; lobbyists from financial industry and, 87–89, 88, 291n30; mobilization of constituencies and, 75–80, 77, 78, 289n9; real estate industry and, 76, 78, 81–82, 82; retail drug industry and, 76–77. See also power
predatory mortgage lending: bubbles and, 26; courts and, 108–9; Democratic Party and, 11, 147; derivatives and, 141; homeownership and, 141; policy responses and, 11, 13, 108–9, 141, 147, 193–94, 216; political reasons for crisis of 2008 and, 11; pop of 2008 and, 193–94, 216–17, 301n21; populist responses to crisis and, 244, 256; Republican Party and, 11, 147; state governments and, 13, 108–9; teaser loans and, 5, 21–22, 26, 138, 217. See also homeownership; mortgages
presidential debates, 275
president(s). See executive branch; specific presidents
private sector: crises resolution by, 56; crony capitalism and, 294n22; MBSs and, 131, 139, 141–42, 218, 294n34; mortgages and, 125–26, 158, 189, 218; off-budget subsidies and, 126–33, 218, 271; political advisors’ experience in, 6, 183; political bubble of crisis of 2008 and, 4–5, 125, 301n37; self-regulation and, 132. See also bonuses
psychology of decision making, and bubbles, 32–33, 35–36
Public Broadcasting Service (PBS), 277
Public Utility Holding Company Act (PUHCA) of 1935, 134, 161, 165, 170
Raines, Franklin, 5, 75, 117, 118, 132
Reagan, Ronald: concentration in industries and, 134; delays in policy response and, 178; deregulation and, 134; Fed appointments and, 286n15; free market conservatism and, 270; political reasons for crisis of 2008 and, 4; presidential pocket veto and, 100
real estate industry: bankruptcy laws and, 127; campaign contributions, 277; campaign finance and, 81, 82; financial innovations and, 19; information from lobbyists and, 88; interests and, 27–28, 126–28, 131, 292n6; lobbyists from, 87, 88, 88–89, 289n9; power of interests and, 76, 78, 81–82, 82; psychology of decision making and, 32; self-interests and, 26; state governments and, 141, 147. See also financial industry; housing bubble
reconciliation process, 101–2, 161, 295n14; political responses and, 161, 295n14
redistributive egalitarianism, 19. See also egalitarianism
reforms: financial industry and, 281–82; fiscal policy, 280; health care industry, 48, 181, 195–96, 241, 241–43, 250, 251–52; Medicare, 281; of MMFs, 275, 304n4; opposition to, 12–13; reform trap and, 114; Social Security, 281; welfare, 280–81. See also Dodd-Frank
regulatory agencies: authority of, 113, 164, 169, 188–89; regulatory capacity and, 112–15, 292n52; responses of, 20, 111–15, 292n46, 292n52; salaries and, 23. See also specific agencies
regulatory capacity: federal government and, 266–67; financial industry and, 112–15, 292n52; Greenspan and, 123; institutions and, 112–15, 292n52; opportunities for reform and, 266–67; political bubble of crisis of 2008 and, 123, 145–47, 146; regulatory agencies and, 112–15, 292n52; SEC and, 105, 123, 147; state governments and, 266
Republican-Democrats, 155, 157, 174, 226. See also Jeffersonianism
Republican Party: summary of, 268–70; agrarian interests and, 174; bankruptcy laws and, 173–74; campaign finance and, 83, 277; debt ceiling and, 279–80; financial industry and, 80, 83–85, 85; financial regulation and, 279; financial sector contributions and, 277; foreclosures and, 218–21, 219, 300n62, 301n21; free market conservatism and, 5, 15–16, 18–19, 42, 281; global economy and, 125–26; gridlock interval and, 100–101; ideology and, 39–40, 224–25, 225–26, 279; ideology scores and, 163, 190–94, 192, 193, 297nn14–16, 298n17; interests and, 279; limited government responses and, 57, 58; mobilization of constituencies and, 80; negative agenda control and, 96–98, 97; “ownership society” and, 5; polarization and, 110–11, 181; policy responses and, 238, 301n28; political reasons for crisis of 2008 and, 5, 6; populist responses to crisis of 2008 and, 233–34, 300n7; predatory mortgage lending and, 11, 147; reversals of power and, 179–81, 180; self-interest and, 18; strategic disagreement and, 105–7; tax increases, 279; whites’ median household incomes and, 122, 122–23. See also liberal-conservative politics; Tea Party
Reserve Primary fund, 276, 304n4
Resolution Trust Corporation (RTC), 11, 165, 296n24
reversals of power, 178–81, 180
Riegle-Neal Act of 1997, 11, 92, 123, 147, 255
“robo-signing,” 26, 256, 285n2
Romney, Mitt: Bain Capital and, 278; campaign finance and, 278, 304n14; campaign strategy of, 279; on Dodd-Frank, 275, 278–79; financial regulation and, 275
Roosevelt, Franklin Delano, 11, 57, 104–5, 161–63, 177, 180, 230, 291n29
Roosevelt, Theodore, 71–72, 74, 269, 271
RTC (Resolution Trust Corporation), 11, 165, 296n24
Rubin, Robert, 6, 12, 42, 118, 140, 172, 183, 185
“rules of the game,” 16–17. See also institutions
Ryan, Paul, 280
Santelli, Rick, 228, 239–40, 242, 244, 302n39
Sarbanes-Oxley Act of 2002, 13, 62–64, 63, 111, 139, 165–66, 178, 288n46
savings and loan crisis (S&L) of 1985: cost of, 45, 131; delays in policy response and, 11, 74, 93, 164–65; deregulation and, 139, 147; elections and, 181–82; FIRREA response, 20; institutions and, 26, 131, 136; limited policy responses and, 170–71, 296n24; policy responses and, 11, 147; state governments and, 108; transitions in politics and, 178
Schapiro, Mary, 304n4
Schwartz, Anna, 282
SEC (Securities and Exchange Commission). See Securities and Exchange Commission (SEC)
Secondary Mortgage Market Enhancement Act of 1984, 147, 294n30
Securities and Exchange Commission (SEC): crisis of 2008 and, 4; delays in policy response and, 12; enforcement of regulations and, 18, 74, 79–80, 132, 237, 293n22, 303n9; financial innovation and, 144; gridlock and, 276; implementation of financial regulations and, 276; information from lobbyists and, 87; limited policy responses and, 170, 296n34; MMFs and, 304n4; opportunities for reform after crisis and, 257; policy control and, 279; regulatory capacity and, 105, 123, 147; rule making, 276, 304n4; settlements and, 303n9
securities and investments industry (securitization): campaign finance and, 82, 82, 289n15; lobbyists and, 87–88; misinformation and, 284n15; political reasons for crisis of 2008 and, 8–9; subprime mortgages and, 33–34. See also MBSs (mortgage-backed securities); specific types of securities
self-interest: crisis of 2008 and, 4, 25–26, 285n3; financial bubbles and, 17–18; political bubbles and, 17–18, 284n33; weak regulations and, 72. See also bonuses
self-regulation: crisis of 2008 and, 27, 41–42; elite and, 74–75; of financial industry, 27, 42; financial innovation and, 21; ideology and, 41, 42, 286n12; political bubble of crisis of 2008 and, 125, 140; political risk factor and, 263; private sector and, 132
sequestration, 280
shadow banking system, 9–10, 21, 155, 221
short-termism, 181–83. See also elections
“skin in the game,” 8, 10, 141, 188–89, 257, 294n34
S&L (savings and loan crisis) of 1985. See savings and loan crisis (S&L) of 1985
Social Security: privatization of, 280; reform, 281
special interests. See interests
Spitzer, Eliot, 79–80, 108, 186
state governments: bankruptcy laws and, 166; complexity of regulations and, 257; credit markets in historical context and, 157; federal deference to, 108–9, 186, 216–17, 299n58; financial industry and, 59, 108–9, 163, 186, 216–17, 296n19, 299n58; homeownership and, 13, 127, 137, 139, 141; opportunities for reform and, 266, 271; pensions, 281; pop of 2008 and, 206, 216, 299n40; predatory mortgage lending and, 13, 108–9, 190, 216–17, 244; regulatory capacity and, 266; stimulus package of 2009 and, 206; stimulus plan of 2008 and, 198, 200; taxes and, 177
Stiglitz, Joseph, 5, 21, 42, 132, 247, 262, 265–66
stimulus package (American Recovery and Investment Act) of 2009: summary of, 39–40, 194, 206–7, 299n42; delays in policy response and, 161, 206; elections and, 204–5, 205, 206; filibuster and, 205; gridlock interval and, 102; ideology and, 39–40; liberal-conservative politics and, 52, 54, 54, 57, 195–207, 202, 203, 205, 298nn29–32; mobilization of constituencies and, 80; personal tax cuts in, 298n24; pivotal politics and, 150, 195, 198–207, 202, 203, 205; polarization and, 206; populist responses to, 204–5, 298n35; state governments and, 206, 299n40; transitions in politics and, 206
stimulus plan of 2008, 198–201, 298nn20–22, 298n24. See also stimulus package (American Recovery and Investment Act) of 2009
stock market crash of 1929, 11, 31, 40, 57, 161, 170
subprime mortgages and crisis: summary of, 2, 5, 172; CDOs and, 142; civil lawsuits related to and, 277; complexity of regulations and, 257; deregulation and, 171; egalitarianism and, 43–44; elites and, 22; Fannie Mae and, 44, 287n18, 303n9; financial loss, 276–77; Freddie Mac and, 287n18, 303n9; global economy and, 144; limited policy responses and, 166, 172, 182; policy responses and, 28, 74, 137–38, 182, 194, 216–17, 288n46; political reasons for crisis of 2008 and, 8–13; predatory mortgage lending and, 189–90, 194; securitization and, 33–34; settlements and, 254; “skin in the game” and, 8
Summers, Lawrence: financial innovation and, 140; Gramm-Leach-Bliley Act and, 42; limited policy responses and, 172; opportunities for reform after crisis and, 253; policy responses and, 6, 12; as political advisor, 12, 75, 185, 185; political bubble of crisis of 2008 and, 118; private sector and, 6, 183
TARP (Troubled Asset Relief Program) of 2009: summary of, 3, 6, 184, 194, 214–15; bonuses and, 230–31; campaign finance and, 85, 225, 300n67; cloture rules and, 222; delays in policy response and, 16, 161; elections and, 80, 195, 215, 223–26, 226; financial services industry and, 255; funds for acquisitions, 2; gridlock and, 222; ideology and, 57, 67, 222–24, 224–25; liberal-conservative politics and, 208, 222–26, 224–25, 226; lobbyists and, 67; localism and, 215; mobilization of constituencies and, 80; moral hazard and, 57; populist responses to crisis and, 234–37, 236, 300nn11–12; repayments to, 279. See also Paulson, Henry
taxes: Bush, G. W. and, 279–80; elections and, 279–80; estate tax and, 279; fiscal cliff and, 279; French, 280; fundamentalist free market capitalism and, 177–78; income, 277–79; increases and, 280; interests and, 280; legislation, 280–81; mortgage deductions and, 127, 294n26; negative policy effects and, 279; pop of 2008 and, 298n24; Tax Reform Act of 1978, 110; Tax Reform Act of 1986, 127
Tea Party: summary of, 232, 239–40, 241, 250; debt ceiling and, 279–80; elections and, 245–46; elite benefactors and, 242; financial industry and, 240–44, 302n42; free market conservatism and, 40, 284n33; fundamentalist free market capitalism and, 16; health care reform and, 241, 241–43; ideology and, 149, 242, 245–46, 246; interests and, 242; opportunities for reform after crisis and, 253; pivotal politics and, 299n50; as a political base, 279; the poor and, 240, 244–45; stimulus package of 2009 and, 240–41; taxes and, 240–41
teaser loans, 5, 21–22, 26, 138, 217
third-party politics, 249, 267–69, 303n26
Thrift Industry Recovery Act of 1987, 164–65, 296n22
“too big to fail,” 43, 123–24, 139, 150, 241, 254–55, 265–66
“too big to jail,” 277
transitions in politics, 154, 173–78, 194, 201, 206
Troubled Asset Relief Program (TARP) of 2009. See TARP (Troubled Asset Relief Program) of 2009
UBS, 18, 67, 82–83, 125–26, 144, 183, 186, 277–78, 293n22
United Copper Company, 72, 169
U.S. Congress: debt ceiling and, 279–80; legislation compromises under FDR and, 11, 161–63, 291n29; legislation hurdles under Obama and, 161, 163, 291n29; polarization and, 50, 53, 54, 55, 57–62, 58, 61, 288n37; polarization of fiscal policy in, 279; political reasons for crisis of 2008 and, 4–5; populist responses to crisis of 2008 and, 233–34, 300n6; reconciliation process and, 101–2, 161, 295n14; TARP and, 3; tax legislation, 280–81. See also liberal-conservative politics; voting in Congress; specific parties
U.S. Treasury: insuring MMFs and, 304n4; UBS and, 277
Volcker, Paul, 136, 164, 210, 250, 262, 286n15
Volcker Rule, 22, 186–87, 210, 253, 262, 264
voting in Congress: financial issues and, 62–67, 63, 65, 288nn46–47; liberal-conservative politics and, 49–52, 51, 53, 54, 54–57, 288n37, 288nn34–35; spatial model and, 47–48, 51, 62–68, 63, 65, 66, 288nn46–47. See also U.S. Congress
Wachovia Corp. (WB), 119–21, 120, 123–25, 145, 149, 255, 266, 292n3
Wall Street: bailouts, 279; bankruptcy laws and, 159; bonuses and, 4, 113, 230–31; campaign finance and, 277; cognitive regulatory capture and, 225; courts and, 108–9; crisis of 2008 and, 126, 217; financial innovation and, 140–41; government employee experience on, 75, 113; housing bubble and, 13; human capital and, 25–26; ideology and, 27, 113, 124; influence of, 6, 167, 169, 171–72, 174; lobbyists from, 22, 162; opportunities for reform and, 253–54; pop of 2008 and, 184, 186; populist responses to crisis and, 230–33, 235, 300n6; self-interest and, 4, 26; trust in, 282. See also financial industry; self-regulation; specific laws
Wall Street Reform and Consumer Protection Act of 2010. See Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
WAMU/WM (Washington Mutual), 119–20, 120, 124, 139, 145, 150
Warren, Elizabeth, 150, 187, 187, 250, 256, 281
Washington Mutual (WM/WAMU), 119–20, 120, 124, 139, 145, 150
WB (Wachovia Corp.), 119–21, 120, 123–25, 145, 149, 255, 266, 292n3
weak regulations: crisis of 2008 and, 8, 20, 26–27; financial industry and, 64, 74, 141; financial services industry and, 20, 22, 74, 111, 164, 216, 261; institutions and, 20, 139; liberal-conservative politics and, 64, 111; pivotal politics and, 111; self-interest and, 72
Wells Fargo: acquisitions by, 124–25, 149, 266, 292n3; campaign finance and, 82; equity investment returns and, 119–21, 120; largest banks list and, 82, 145; mortgage share of, 276; political power of, 76–77, 87–88; settlements and, 254; undermined regulations and, 28–29
Whigs/Whig-Democrats, 173–74, 179
whites, and finances, 122, 122–23, 159
WM/WAMU (Washington Mutual), 119–20, 120, 124, 139, 145, 150