The Politics of Mortgage Subsidization

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In the last 15 years or so of that policy, what we see is a george h w bush followed by bill clinton. And even though you might think of those people as very different ideologically, they actually were part of a continuous thread of very similar kinds of policies. In the case of the united states, we had activist groups allied to a bankers that were in the process of creating mega banks. So you got these unlikely partnerships ta, precisely because they straddled partisans lines. We're extremely durable, and hav made it very hard for any a party to deviate from the agreement.

Charles Calomiris of Columbia University and Stephen Haber of Stanford University, co-authors of Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, talk with EconTalk host Russ Roberts about their book. The conversation focuses on how politics and economics interact to give some countries such as Canada a remarkably stable financial system while others such as the United States have a much less stable system. The two authors discuss the political forces that explain the persistence of seemingly bad financial regulation. The conversation includes a discussion of the financial crisis of 2008.