May 16

Past Event

How the Great Credit Squeeze Happened and How to Prevent Another



  • Martin Baily

    In purchasing mortgage-backed securities, Baily explains, institutions relied on credit ratings and didn''t realize the risk. Transparency, he says, will help them in the future.

    Martin Neil Baily

  • Douglas Elmendorf

    Douglas Elmendorf says that people are inclined to take large risks because of the safety net that government provides - from deposit insurance to bail-outs from the Federal Reserve.

    Douglas W. Elmendorf

  • Sheila Bair

    Sheila Bair says that the slowdown in the U.S. economy appears to be directly linked to the housing crisis and that immediate relief is needed - at zero cost to taxpayers.

  • Robert Litan

    Robert Litan outlines the fundamental flaws of the regulations issued by the Basel Committee on Banking Supervision. He says that there needs to be a rethinking of the whole system.

    Robert E. Litan


America’s financial system has faced its greatest challenge in 70 years. The crisis originated in America’s subprime mortgage market, and spread quickly to other debt and equity markets. Some large financial institutions failed, and others were imperiled. How could such a sophisticated financial system go so wrong and cause so much damage? Brookings Senior Fellows Martin Neil Baily, Douglas W. Elmendorf, and Robert E. Litan collaborated to write a comprehensive analysis of the current credit crisis, which they released at this public forum. The authors explained what happened and put forward a specific agenda of policy actions to reduce the chance that history repeats itself.

Following a brief welcome by Economic Studies Vice President and Director William G. Gale, FDIC Chairman Sheila Bair gave opening remarks on the current challenges facing the financial system and possible policy solutions to alleviate the current crisis. Baily, Elmendorf and Litan gave an overview of their recommendations and were then joined by outside experts in a roundtable discussion. Sebastian Mallaby of the Council on Foreign Relations and the Washington Post moderated the discussion.

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Event Agenda


May 16, 2008

10:00 AM - 12:00 PM EDT

Johns Hopkins/SAIS

Kenney Auditorium

1740 Massachusetts Avenue, NW


For More Information

Brookings Office of Communications

(202) 797-6105