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January 22, 2014

Recession’s True Cost Is Still Being Tallied

 “On Sept. 15, 2008, the investment bank Lehman Brothers collapsed after a long struggle to avoid bankruptcy, paralyzing the world’s financial networks and tipping the United States economy into an abyss from which it has not yet fully emerged.

“More than five years later, there is still no answer to perhaps the most critical question raised by the man-made disaster: How much did it all cost?

“In July, three economists at the Federal Reserve Bank of Dallas, Tyler Atkinson, David Luttrell and Harvey Rosenblum, gave it a shot, at least as far as the United States economy goes.”

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“Nonetheless, the legal attack on the new regulation is disingenuous. Increasing the industry’s costs and reducing its profits is an objective of the regulation overhaul, not a bug. The goal is to ensure that banks internalize the costs of their risky business rather than have them borne by the rest of society.

“’Regulatory agencies are being sued to prevent that the law be put in place because it will cause the industry that crashed the world to lose money,’ said Dennis Kelleher, who heads Better Markets, a nonprofit formed after the financial crisis to press for stricter regulation of the banking sector. ‘But Congress made the decision of who was going to bear the costs.’”

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Read full New York Times article here

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