Henry Farrell has an interesting account of a discussion session Bill Clinton held with a group of bloggers. This jumped out:

Clinton’s basic argument was that the [financial] crisis was one of an overleveraged Wall Street system which emphasized the volume of transactions, and in which people were rewarded for chasing risky deals, and in which there were too few good investment opportunities. Money ended up being funneled into real estate that shouldn’t have been. Clinton furthermore argued that if there had been a real clean energy policy, it would have created alternative investment opportunities in dealing with climate change — because there wasn’t such a policy, the money was “misspent.” This last bit of the argument doesn’t seem entirely plausible to me — would there really have been enough investment opportunities generated by clean energy to suck up the loose cash sloshing around? — but I’ll leave it to those with more specific expertise to evaluate properly.

If there had been more clean energy investment opportunities, investment capital would have gone that direction instead of into dodgy housing, housing mortgages, mortgage-backed securities, mortgage-backed-security derivatives, derivative double-mortgage security flux capacitors, etc.

Hmm.

Beutler doesn’t buy it:

… as long as there was a consensus on Wall Street that housing prices would rise indefinitely, and at such a rate that people without a whole lot of money could finance a home with increased equity, people were going to invest in the idea that the housing bubble wasn’t a bubble. And then that bubble was going to burst.

If there’d been smart energy policy in place for 10 years — if, say, the Clinton administration had put some in place — R&E would have scaled up and there would be a ton of clean energy investments around. But those investments don’t just spring up immediately in the wake of policy. Even now, there’s more money than good investments in that sector. Energy startups require lots of money, time, and patience.

And as Brian says, even with those investments available, I doubt they could compete with the Magic Money that’s been available to investors these last few years. So maybe smart energy policy could have taken some of the sting out, but the rot on Wall Street would still have been … rotten.