The 2008-09 financial crisis was caused by too much debt and leverage, facilitated by a government that insured against moral hazards, and the response involves more debt, leverage and government.

The claim has two parts. (1) The crisis was caused by excessive debt and leverage, facilitated by government insurance against moral hazards such as implicit guarantees of Fannie Mae and Freddie Mac, too-big-to-fail expectations and deposit insurance. (2) The response involved more debt, leverage and government. Judge against authoritative accounts, for example the 2011 Financial Crisis Inquiry Commission report (majority and dissents), central bank and IMF analyses and academic consensus, and against the policy record as of April 2009 (TARP, fiscal stimulus, Fed balance-sheet expansion, bailouts and guarantees). True: authoritative sources broadly agree that excessive debt and leverage were a central cause, that government guarantees and moral hazard materially facilitated it, and that the response expanded debt and government's role. Mostly true: leverage as a central cause and the expansionary response are well supported, and the government moral-hazard role is recognised as a significant contributing factor but not the primary one. Mixed: leverage and the response are supported, but the government-facilitation part is disputed, being treated as minor or rejected by the major official accounts. Mostly false: only one part holds, and the causal story substantially distorts the consensus. False: authoritative accounts reject debt and leverage as a cause, and the response did not increase debt or government involvement.

Set before the research began.

1. E1 Reflections on Economics, Policy and the Financial Crisis Federal Reserve Bank of Richmond (speech by President Jeffrey M. Lacker) · 24 September 2010

   “Financial institutions that benefitted from implicit government guarantees — notably Fannie Mae, Freddie Mac, and several European banking institutions — fueled the demand for securities backed by risky subprime mortgages.”

2. E2 Reflections on Economics, Policy and the Financial Crisis Federal Reserve Bank of Richmond (speech by President Jeffrey M. Lacker) · 24 September 2010

   “There is little doubt that excessive risk-taking by too-big-to-fail firms significantly contributed to the crisis, with Fannie Mae and Freddie Mac being prominent examples.”

3. E3 Conference Agreement for H.R. 1 (the American Recovery and Reinvestment Act of 2009) Congressional Budget Office · 13 February 2009

   “CBO estimates that enacting the conference agreement for H.R. 1 would increase federal budget deficits by $185 billion over the remaining months of fiscal year 2009, by $399 billion in 2010, by $134 billion in 2011, and by $787 billion over the 2009-2019 period (combining both spending and revenue effects).”

4. E4 Monetary Policy Report of February 2009 Board of Governors of the Federal Reserve System · 24 August 2009

   “So far in fiscal 2009, the deficit has increased substantially further, mostly because of outlays under the Troubled Asset Relief Program and the effects of the weak economy on revenues and spending.”

On the cause, a 2010 Richmond Fed speech says institutions with implicit government guarantees, notably Fannie Mae and Freddie Mac, fuelled demand for risky subprime-backed securities (E1). The same speech says excessive risk-taking by too-big-to-fail firms significantly contributed to the crisis (E2). That recognises government guarantees and moral hazard as a significant contributing factor, but this is one official's account, and none of the quotes directly establishes debt and leverage as the central cause. On the response, a CBO estimate says the stimulus would add $787 billion to deficits (E3), and the Fed's February 2009 report says the deficit rose substantially, mostly because of TARP outlays (E4), which supports an expansion of government debt and involvement by April 2009.