Shadow banking drove the crisis as much as mortgage defaults did

Evidence

In his view the mortgage bubble was only half the story; the rise of shadow banking provides the necessary other half. Geanakoplos believes this permits him to reconcile the ahistorical laws of Walras with the historical specificities of the last few decades. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 813

Categorization

• QUESTION: The terse closing claim about reconciling Walrasian laws with historical specificity is worth unpacking; how does the leverage-cycle model actually accomplish that?
• XREF: Connects to Minsky’s financial-instability hypothesis and shadow-banking literature on the post-2008 crisis. — connects to: Packing risky mortgages into opaque derivatives under weak regulation enabled the financial crisis — Albert Bandura, Moral Disengagement: How People Do Harm…, 1492; Commission-based financiers possessed phantom-like unreality and lacked real control — Hannah Arendt, The Origins of Totalitarianism, 519

Broader Connections

• Packing risky mortgages into opaque derivatives under weak regulation enabled the financial crisis #corroborates (0.85) — Albert Bandura, Moral Disengagement, 1492
• Commission-based financiers possessed phantom-like unreality and lacked real control #corroborates (0.70) — Hannah Arendt, The Origins of Totalitarianism, 519