Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The result was a sprawling piece of legislation running to 849 pages.34 Rather than offering a single coherent thesis, the Wall Street Reform and Consumer Protection Act, commonly known as Dodd-Frank, embodied a compendium of crisis diagnoses. Was the crisis due to mass predation of poorly informed borrowers? In which case what was needed was Elizabeth Warren’s Bureau of Consumer Financial Protection (Title X). Was it opaque over-the-counter derivatives that had blown up the system? In which case the fix was transparent, market-based trading of derivatives (Title VII—Wall Street Transparency and Accountability). Was it the breakdown of responsibility in the extended chains of mortgage securitization that poisoned the well? In which case securitizers should be required to have skin in the game (Title IX—Investor Protections). Was the sheer size of banks at the root of all the problems? Were they simply too big to fail? In which case the answer was to restrict bailouts and to make the industry pay for them (Title II—Orderly Liquidation Authority) and to cap banks’ further growth (Title VI, sections 622 and 623). Had investment banks used client money to gamble? If so, the thing to do was to reinstate 1930s-style divisions between commercial and investment banking by way of the so-called Volcker rule banning “proprietary trading” (Title VI, Volcker rule). All of these theories about the crisis of 2007–2009 had major political resonance. All of them made their way into the mea...