The Capital for 6/19/09: The Great Joseph Stiglitz Explains Succinctly Why We Are In This Recession

Via a terrific post from bobswern, Columbia University professor and Nobel laureate Joseph Stiglitz explains clearly why we are in the economic mess that we are in, showing the key five reasons.

1)The Reagan administration's decision to replace Federal Reserve Board Chair Paul Volcker with Alan Greenspan

2) The veritable repeal of the Glass-Steagall Act, due to the passage of the Gramm-Leach-Bliley Act

3) George W. Bush' tax cuts (2001, 2003), along with various other "leeches," such as the Iraq War, and the country's dependence upon foreign oil--two key factors that have sucked trillions of dollars out of our economy over the past three decades--in other words, very little was done to actually stimulate the economy, instead a focus upon economic bubbles was the rule of the day;

4) The epic fail of the ratings agencies (with Standard & Poor's, Moody's, and Fitch being the three largest), along with a Wall Street ethos that amplified Michael Douglass' "Wall Street" character's (Gordon Gecko's) mantra: "Greed is good," to the point where all that mattered was performance in the current quarter (1993-present).

Essentially, this tacitly brings the credit default swaps/derivatives issues onto Stiglitz' list, since it's widely acknowledged that derivatives trading is among the most lucrative of sectors on Wall Street, with various sources telling us that upwards of 40% of Goldman-Sachs net profits are derived (pun intended) from that business sub-vertical, alone;

5) The passage of the current Wall Street bailout package (October 3, 2008).