The Map and the Territory by Alan Greenspan — TWO | THE CRISIS BEGINS, INTENSIFIES, AND ABATES

1. 1. The global financial crisis began with BNP Paribas's disclosure of subprime mortgage losses on August 9, 2007, triggering coordinated central bank action.
2. 2. Global equity losses reached $50 trillion by the crisis peak, equivalent to four-fifths of 2008 global GDP.
3. 3. The Lehman failure triggered an unprecedented global evaporation of short-term credit, including a run on money market mutual funds.
4. 4. Shadow banking assets grew from $26 trillion in 2002 to $62 trillion in 2007, and remained over half the size of the regular banking system.
5. 5. Risk management models failed because they underestimated tail risk, which turned out to be 'morbidly obese' rather than merely fat.
6. 6. Credit-rating agencies failed by bestowing triple-A ratings on securities that proved highly toxic, offering a false sense of security.
7. 7. Regulation failed despite extensive oversight, including on-site examiners at large banks, because regulators also underestimated risks and complexity.
8. 8. Had global banks maintained adequate capital buffers to absorb post-Lehman losses, no contagious defaults would have occurred and the crisis would have been contained.
9. 9. The housing bubble caused a severe crisis because debt mattered; leveraged institutions held mortgage-backed securities, unlike the dot-com bubble where equities were held by unleveraged households.
10. 10. Protracted economic stability from 1983 to 2007 created the tinder for asset price bubbles, as herd behavior turned skeptics into believers.
11. 11. Greenspan argues that regulators should impose large generic equity capital requirements rather than trying to predict which assets will turn toxic.
12. 12. The 'too big to fail' problem creates an implicit subsidy that impairs financial efficiency and capital allocation, and it will be difficult to let large institutions fail in the future.