Financial Innovation Too Much or Too Little

In assigning blame for the recent economic crisis, many have pointed to the proliferation of new, complex financial productsmortgage securitization in particularas being at the heart of the meltdown. The prominent economists from academia, policy institutions, and financial practice who contribute to this book, however, take a more nuanced view of financial innovation. They argue that it was not too much innovation but too little innovationand the lack of balance between debt-related products and asset-related productsthat lies behind the crisis. Prevention of future financial crises, then, will be aided by a regulatory and legal framework that fosters the informed use of financial innovation and its positive effects on the economy rather than quashing innovation entirely.
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