Yale Professor Who Had Controversial Role in the Crisis Now Teaches About It

Alexander Osipovich:

He later told the Journal that this article wouldn’t be “accurate except within your understanding of the crisis. Basically you don’t understand the crisis.”

Many economists consider Mr. Gorton a top expert on financial crises. His fans include former Federal Reserve Chairman Ben Bernanke, who praised the professor’s insights in 2010.

Mr. Gorton has likened the 2008 crisis to an old-fashioned bank run. But instead of anxious depositors emptying their bank accounts, Mr. Gorton has said the bank run of a decade ago played out in the so-called repo market.

This is where banks like Lehman Brothers raised short-term cash by selling securities and repurchasing them later at a slightly higher price. When investors questioned the value of those securities, the repo market froze up.

Some critics say Mr. Gorton’s work plays down other explanations for the crisis, such as the U.S. housing bubble—or wrongdoing on Wall Street.