Fingers on the Scales

The scene from Margin Call that had the most powerful effect on me was Will Emerson's monologue on "normal people." In this scene he dodges the claim that bankers were the ones that caused the crisis and instead put the blame on "normal people" for wanting big cars and big houses that they could not afford. This is partially true as the subprime mortgage crisis was a very large contributor to the financial crisis in 2008 (however we do also hear of predatory practices pursued by lenders).

The years after the crisis have been spent by consumers deleveraging the debt that they had accumulated and the process is almost completed. However this begs the question of whether consumers will "releverage". Many economists argue that despite the reforms enacted following the 2008 crisis dangers still exist within the financial system, namely that banks are still "too big to fail" or "too big to regulate". This begs the question of whether the government will ball out the banks again if another crisis were to strike.

Are we destined for another financial crisis? Is the Dodd-Frank bill really sufficient to protect the financial system? Are banks still "to big to fail" or "to big to regulate"? Hopefully the answers are no, yes, and no. Unfortunately, only time will tell.