Columbia International Affairs Online: Working Papers

CIAO DATE: 04/2009

Lessons of the Financial Crisis

Benn Steil

March 2009

Council on Foreign Relations


A new report from the Council on Foreign Relations (CFR), Lessons of the Financial Crisis, calls for major economic reforms, both to avoid fueling excessive corporate and individual borrowing in the future and to make the financial system much more resilient in the face of falling asset prices. "The crisis offers a sobering lesson about the dangers of policies that fuel the rapid buildup of debt across the economy," says the report. "Excessive leverage in the economy needs to be prevented because credit does not return to normal once asset prices stop rising and start falling. It becomes dangerously scarce."