Anticipating Financial Risks: A reality check by AEI's Alex Pollock

[W]e are not able to avoid repeated disastrous mistakes like those that led to the U.S. housing meltdown and the European sovereign debt crisis . . .because financial markets are governed by a [repetitive] system of interconnected decisions, theories, strategies, predictions, actions, and expectations that lead to booms and busts. History shows that the complexity of these interactions makes it nearly impossible to predict accurately which way the markets will go.” -- Alex J. Pollock in the August 2012 AEI Financial Services Outlook

Among Pollock’s main points:

  • Because of constantly interacting theories, strategies, predictions, actions, and expectations, uncertainty is an unavoidable fact of life in financial markets.
  • Everyone—from Wall Street “rocket scientists” to regulators and U.S. Federal Reserve bankers—is enmeshed in this complex, repetitive system of uncertainty, making even our most knowledgeable plans prone to mistakes.
  • Just as the government promotion of Fannie Mae and Freddie Mac, a well-intentioned policy, resulted in their financial collapse, the current vast expansion of financial regulation will not save us from future crises.

 

AEI resident fellow Alex Pollock is a former president and CEO of the Federal Home Loan Bank of Chicago. He can be reached at 202.862.7190 or through his research assistant at [email protected] (202.419.5212). For additional media requests, or to reserve AEI’s in-house radio (ISDN) or TV studio, please contact [email protected] (202.862.5823).

Follow @AEInews

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alex J.
Pollock

What's new on AEI

We still don't know how many people Obamacare enrolled
image The war on invisible poverty
image Cutting fat from the budget
image Speaker of the House John Boehner on resetting America’s economic foundation
AEI on Facebook
Events Calendar
  • 15
    MON
  • 16
    TUE
  • 17
    WED
  • 18
    THU
  • 19
    FRI
Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.