Krugman: Getting Ready to Party Like It’s 2008
On Sept. 15, 2008 Lehman Brothers failed.
Within weeks the whole U.S. financial system was caught in the downward spiral of a massive bank run, on a scale not seen since the 1930s.
Yet there was an important difference from the 1930s bank runs: in 2008, the panic mainly resulted in flight from “shadow banks,” nonbank institutions that performed bank-like functions.
Conventional banks were largely immune from the 2008 panic because deposit insurance and federal regulations – a consequence of the 1930s bank runs – protected them.
The clear lesson of 2008 is that effective financial regulation is essential. For three generations after the great bank runs of 1930-31, America avoided “systemic” banking crises — crises that threaten the whole financial system, as opposed to individual institutions.
This era, which Yale’s Gary Gorton calls the Quiet Period, was the result of New-Deal-era protections — especially deposit insurance — and regulations that limited banks’ risk-taking.
But post 1980, finance was increasingly deregulated. In particular, the government failed to extend bank-type regulation to shadow banks that posed systemic bank-type risks.
Trump’s cronies are undermining financial stability
Paul Krugman Nov 28 2025
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