Geithner gives a lesson on the global financial crisis
by Robert Laing
This should be interesting…
YALE University this week launched a massive open online course on the global financial crisis co-lectured by the US treasury secretary during the drama of 2008, Tim Geithner.
I’ve just completed the first week’s assignments — the deadline is June 27, and the course is free if you don’t want to pay $75 for a statement of accomplishment, so plenty of time for anyone interested to still enroll.
In the first week’s lectures, titled The Common Causes of Financial Crises, Geithner provides an excellent overview of the problem, complete with wooden blocks he uses to demonstrate how stable banks differ from unstable banks, and how unstable banks can knock each other over.
Among his illustrations is a graph titled “Mount Fuji” which shows US household debt as a percentage of gross domestic product (GDP) ascending from about 25% in 1950 to peak at over 100% when the housing bubble burst in 2008, and then tumbling down to about 80% in 2010.
The next graph in Geithner’s lecture has the same Mount Fuji silhouette, but is layered into three categories of culprits responsible for allowing US households to get so indebted. The slice of traditional banks — the lenders that fell under the auspices of Geithner’s treasury and the US’s central banking system — was fairly flat from 1950 to 2010.
The slice in the middle, which Geithner labeled “holding companies and brokers or dealers”, grew fairly substantially to about quarter of the size of traditional banks when the housing bubble burst. The main culprit was the top slice, labeled “shadow banks”, which ballooned to be an even bigger lender to households than traditional banks by the time the card castle collapsed.
And to sign up for the course, click here…