I appreciate the opportunity to participate in this panel to learn lessons from the ongoing financial crisis. By my count, the participants who came before amassed 15 lessons, which is a little disquieting. That so few people can come up with so many lessons immediately leads to the conclusion that matters are complicated. Despite differences among panelists, an agreed-upon lesson at this banking conference is that bankers are not as bad as some people might think.
For me, the good news for our session on learning lessons is that failure teaches as much, if not more, than success. And events over the last year and a half have given ample opportunity to better ourselves. In that regard, the situation reminded me of a reflection of David Halberstram in the introduction of the 20th anniversary edition of the Best and Brightest. Halberstram wrote that "The failure of a major policy is . . ., if nothing else, a marvelous lever with which to open a debate." We are now at the stage where the debate is about to be opened.
The ellipsis in the quote from The Best and the Brightest referred to the United States' performance in Vietnam. In my remarks, I will talk about a failure of equivalent scale and scope in crisis management and regulation of financial institutions. This assessment is bipartisan. In 2008, policy-making was inconsistent, adding uncertainty in an uncertain environment. This magnified the reaction in financial markets to the initiating economic shock that we built too many houses. Inefficient policies wasted government resources, and the reputation of some key institutions was damaged.
Vincent Reinhart is a resident scholar at AEI.