“Financial crises are not rare,” Gorton says, noting that 147 systemic events have occurred since 1970. They generally come about when people no longer believe their banks are safe and thus want their money en masse, creating a run on the banks. History suggests that financial crises are inevitable because new forms of short-term debt continually transform the system, Gorton says. But regulation can potentially cushion these blows. Of course, there may be a tradeoff between crisis-avoiding regulations and economic growth.

A session from the 2008 Financial Crisis: A Ten-Year Review conference held on 8-9 November 2018 in New York.