Abstract
In my essay, I formulate an alternative scenario for the current crisis of the US financial system. Unintended and poorly understood consequences of the Gramm-Leach-Bliley (1999) banking reform and, especially, the Bankruptcy Abuse Prevention and Consumer Protection Act (2005) created numerous perverse incentives in the US financial industry.I argue that the trigger for the financial collapse was the refinancing of the short-term consumer debt through home equity loans.
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