Why Are We In This Financial Crisis?

A lot of people in the U.S. are asking "Why are we in this financial crisis?" What led to it, how do we get out of it, and how can we prevent it from happening again in the future?

People want someone to explain the current financial crisis and its cause--who, or what, is behind the crisis, and the impacts of the credit crisis on financial institutions.

In President Bush's speech to the nation on the current crisis he stated "We're in the midst of a serious financial crisis, and the federal government is responding with decisive action." As of the date of this article, the government had yet to agree on how to address the crisis. Text of President Bush's speech on economic crisis.

In response to the current financial crisis in the U.S., The Washington Post recently asked a dozen experts for the one book they'd recommend to understand the crisis, and the human nature behind it. Here's how they explained their project:

"We asked a number of smart people--inside and outside the worlds of economics and finance--to scan their bookshelves for answers. Though there is no single book that can sum up and explain the current conditions, we asked each of our contributors for one book they would recommend to their neighbor, their daughter, their aunt, their barber, priest, rabbi or best friend to help them gain some perspective on these volatile times. We imposed only one rule: You cannot recommend a book you wrote or edited. After that, no rules. It could be a macro-economics text, a popular history or a novel. If there is one unifying theme that runs through these 14 selections, it is this: Bubbles come and go, economic theories rise and fall, fortunes are made and lost. But human nature remains unchanged, from the time of Herodotus to Homer Simpson."

The experts include the following:

Peter R. Orszag, Director, Congressional Budget Office

Robert E. Rubin, Director, Citigroup; former U.S. Treasury secretary (1995-99)

Jagdish Baghwati, Professor of economics and law, Columbia University; senior fellow, Council on Foreign Relations

Sheila Bair, Chairman, Federal Deposit Insurance Corporation

N. Gregory Mankiw, Robert M. Beren professor of economics, Harvard University

Steve Case, Chairman of Revolution LLC and the Case Foundation, co-founder of America Online, former chairman of AOL Time Warner

Franklin D. Raines, Vice chairman, Revolution Health Group; retired chairman and chief executive, Fannie Mae

John Allen Paulos, Mathematics professor, Temple University, author of A Mathematician Plays the Stock Market (2003)

Nell Minow, Editor, the Corporate Library, provider of corporate governance research and analysis

Henry Louis "Skip" Gates Jr., Director of the W.E.B. Du Bois Institute for African and African American Research at Harvard University, author and co-founder of TheRoot.com, owned by The Washington Post Co.

Douglas A. Irwin, Professor of economics, Dartmouth College; author of Free Trade Under Fire (2002)

Mark Cuban, Dallas Mavericks owner; chairman of HDNet; founder of Broadcast.com, sold to Yahoo for $6 billion in 1999

Why are we in this financial crisis? You can see all 12 recommendations here, as well as the reasoning behind each selection:

Making Sense of the Crisis: What to Read on the Economy from The Washington Post