Market designers framed the 2008 crisis as a liquidity problem, not an insolvency one.

Evidence

Market designers claimed the problem stemmed from an absence of liquidity, not—crucially— pervasive insolvency. In their frame, banks possessed a variety of assets, some worthless but most others pretty valuable, and it was the inability to distinguish between the two that caused the crisis. By purchasing these assets, the government would reestablish liquidity, not merely by removing toxic assets from the banks’ balance sheets, but by releasing information that would establish the assets’ true values. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 855

Categorization

• XREF: Connects to the broader thought-collective theme of the book and to Mirowski’s argument that market-design economists provided the intellectual cover for TARP rescue. — connects to: Fire-sale contagion, not state spending, drove the 2008 liquidity collapse. — Mark Blyth, Austerity: The History of a Dangerous…, 85; Market designers claimed better auctions alone could have prevented the 2008 crisis — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 870

Broader Connections

• Market designers claimed better auctions alone could have prevented the 2008 crisis #qualifies (0.82) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 870