Having seen both movies, I found these entries very interesting (and purchased Nicole's book for my Kindle).
A few things left unsaid: Ferguson really portrays Barney Frank as a "good guy", yet Frank was one of Fannie's biggest defenders for many years, fighting off the efforts of Alan Greenspan and others to reduce its margins and risk levels. In truth, Ferguson has little to say about how Fannie, Freddie and the guarantees they provided helped create the markets Wall St. exploited so ruthlessly.
I also think Nicole is far too critical of TARP. It's one thing to rescue a single TBTF institution. But when they're virtually all teetering, there's really no place for just letting the chips fall where they might. TARP occurred in an unprecedented situation, one which we'll hopefully not see again. It's NOT a precedent for more isolated cases.
Also, what needs to be discussed further is Dodd-Frank's (Frank again) institutionaliztion of TBTF as a principle of government policy, moving it from the unspoken to the explicit. This was neither necessary nor prudent, and if institutions remain overleveraged, I'd argue its much more a result of this policy shift rather than TARP.
Thank you for this pair of articles. Each of these authors consistently give me strong points to ponder. While I sit decidedly within the left end of the spectrum, I can never ignore the even-handed argumentation and vast knowledge of these two writers.
I am about to go Google Continental Illinois.
Alan Greenspan's "market forces" are indeed enough to keep excess in check. The proof is in the pudding. It's just that, rather than let markets create and destroy credit on their own, government intervention has taken over the process and made sure the resulting mess was humongously messy, and not just messy.