Abstract: Most economists differ, not on the causes of the Great Recession, but on their relative importance.They concur, though, on the basic problem, namely human, not market failure. This study appliesthe evidence, some new, some old, to re-try the usual suspects. It finds none guilty. Instead, it identifiesbroadly defined multiple equilibrium, mediated by opacity, false rumors, and panic, as the real culprit.There are many models of bank runs. But each can trigger firing runs – firing someone else’s customersfor fear that others are firing your customers. Firing runs, in turn, exacerbate bank runs, producinga vicious cycle. This cycle can be manipulated by those who benefit from economic distress (shortsellers). If the banking system, not the banking players is the problem, the solution surely lies in fundamentalbanking reform. This paper concludes by pointing out that a reform that shifted to 100 percent, equity-financedmutual-fund banking with government-organized, real-time asset verification and disclosure couldpreclude financial runs and their ability to induce firing runs.
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