What caused the financial crisis of 2008? Are policymakers ready to handle the next one?

These are key questions for anyone interested in economic history and policy. In the past decade, a conventional wisdom has developed about the answers.

Yet a new book questions that orthodoxy, offering a more disturbing perspective on the past and a less sanguine prognosis for the future.

In a nutshell, the conventional wisdom goes like this:

In the mid-2000s, the nation experienced a housing bubble. A combination of stupidity, negligence and malfeasance led a bunch of Wall Street firms to make excessively risky bets that the bubble would go on forever. Through mortgage-backed securities and related instruments, they extended credit to home buyers of dubious credit quality.

For a while, this credit expansion fueled the bubble. But when the bubble burst, these new homeowners defaulted in record numbers, and the Wall Street firms headed toward insolvency. The whole financial system teetered on the edge of collapse, leading to a deep recession.