Either way, there is now growing evidence that recessions lead not only to a lower level of future output, but also to a persistently lower growth rate. Some argue that it was the growth slowdown that caused the financial crisis.
This is a hard position to accept for anyone who has looked closely at the behavior of the financial system in the middle of the last decade. We need to remind ourselves that the principle underlying Basel II was that the private sector would manage risk efficiently and effectively, since the last thing a bank would want would be to fail.