The Financial Crisis: A Retrospective

Government efforts to manage the financial crisis and to promote economic recovery have been extensive over the past three years. Hundreds of billions of dollars have been distributed—and much of it now repaid—from the Troubled Asset Relief Program. The Federal Reserve holds more than $2 trillion in mortgage‐backed securities, collateralized loans to financial institutions, and other assets and liabilities to maintain liquidity in the financial markets. The American Recovery and Reinvestment Act injected more than $600 billion into the economy through tax breaks, loans, contracts, grants, and entitlements. Congress also passed the Dodd‐Frank Wall Street Reform and Consumer Protection Act in 2010. Yet economic recovery remains flat. The author examines the reform effort to date, key points of its primary focus, and the politics of implementing the reform as a factor in eventual economic recovery. One component of the reform, the creation of a Consumer Financial Protection Bureau, holds the greatest potential for changing the way consumers participate in the financial markets, but also has drawn the greatest debate and opposition. While regulatory reform alone will not revive the economy, a newly conceived and broadly participatory Consumer Financial Protection Bureau could simplify and streamline the complex linkages that contribute to the supply of credit.