Joseph Stiglitz correctly identifies the banking sector as a major cause of the 2008 / 2009 financial crisis. There is no doubt that people working in banks made huge errors. However, putting all of the blame on banks and banks lobbying for deregulation, and putting faith in future reregulation as a bulwark against future crises, seems a dangerously narrow interpretation of the factors building the crisis.
The idea that banks collectively pursued a common goal of deregulation, leading to the crisis, suggests a degree of direction and coordination that anyone who has worked in a bank can testify does not exist. Banks did want deregulation, but many politicians were ideologically in favor as well. The credit cycle was supporting prosperity and prosperity is always politically popular. Indeed politicians went so far as to castigate banks for not doing enough to lend to low-income earners in the years before the crisis. Banks were told to stop using ‘unreasonable measures of creditworthiness’. There were threats of fines for banks that did not lend to certain lower income groups.
In addition to politicians, two other groups must take some responsibility. In the years before the financial crisis, the media (in particular the financial media) were aggressive in support of leverage and castigated those who pursued more staid banking policies. As media stories, regardless of their accuracy, have an impact on the share price of a company, the management of banks was judged by a standard that was skewed in favor of risk-taking. The behavior of bank managements was shaped by this climate.
And finally, when it comes to the borrowers themselves, some may have been borrowing unrealistic amounts - and while social pressures and rising income inequality might have aggravated this, they should share some of the responsibility.
None of this is to deny that banks and limited regulation conspired to create the crisis. But an approach which focuses on the banking sector and ignores or exonerates other factors, risks creating another crisis. Media and politicians pushed banks to take risks, perhaps excessive risks. Society pushed borrowers to borrow unrealistic amounts of money. A somewhat broader assessment of the causes of the crisis than those offered by Joseph Stilglitz would be prudent.