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Q&A

Did an invisible run on banks kill the economy?

The problem behind the financial crisis was not what we think, says Gary Gorton. Interview by Ben Schreckinger

Four years after the last financial crisis came to a head, it remains an open question whether the US economy is safe from a repeat. The answer depends on another question: What caused the crisis in the first place?

Fault for the crash lies, according to various popular theories, with some combination of over-leveraged banks, a culture of greed on Wall Street, the collapse of mortgage-backed securities, and financial institutions that are too big to fail. But according to Yale University economist Gary Gorton, all of these explanations are wrong, and regulators have done nothing to address the underlying cause of the meltdown.

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