ABSTRACT
Financial sector crises tend to bring sharp contractions in the economy that elevate the unemployment rate for a long time. The bursting of the housing bubble set the financial crisis and Great Recession in motion. As mortgage-backed securities lost value, crisis mounted in the financial sector. Banks, mortgage lenders, and other financial firms fought regulations and lobbied for deregulation. The movement was somewhat less grassroots than it appeared, and it received a great deal of financial backing from the Koch brothers, the libertarian-minded billionaires who own the oil and gas conglomerate Koch Industries. If government regulators had limited the growth of leverage and introduced transparency into product markets, then the housing downturn would have been less likely to precipitate a financial sector crisis. The politics surrounding Obamacare were also extraordinary, especially Republicans’ flip-flop on the three-legged-stool system to expand the health insurance market.
