"Political disunity is often a key driver of sovereign defaults and financial crisis."
Take a second to read that again in a slightly different way, "Hyper-partisanship causes financial crises."
Reinhart and Rogoff go on to talk about that it may seem like a coincidence that the bubble burst in 2008 when the Republicans controlled the White House and the Democrats controlled Congress and they are right - it is a coincidence. The bubble was going to pop either way.
Michael Lewis gives a good analogy in The Big Short about why it popped when it did. I am paraphrasing and editing the analogy every so slightly here: Imagine there are a bunch of people holding down the house from UP; making sure that it doesn't float away. As one person's arms start to get tired, they can hold no longer and let go. That increases the weight that the rest of them are holding down - but its okay since there are still a bunch of people holding it down including the biggest and strongest among them. What's a little more weight for each person? Well, soon another person's arms get tired and let go. One by one they all start to let go. The biggest and strongest start to feel the air under their feet as they can no longer hold it down any longer - it is lifting off either way. They all let go at once lest be carried off with it. The house floats up, up, and away all on its own.
The analogy should be fairly clear: the house is the housing bubble (see what I did there, ha) and the people are the financial institutions (okay, that didn't work as well). The last people holding the house down were some of the large Wall Street Banks - Goldman Sachs, Morgan Stanley, AIG, Bear Stearns, Lehman Brothers. Longer they held onto the myth of the bubble, the more money they ended up losing in it. They all ended the myth at once and came crashing down to back to earth. They needed to be bailed out or "we will wake on Monday without an economy." Despite partisanship, Congress took care of business and got it done - though in two tries.
Rogoff and Reinhart included a poor example for the simple reason that they couldn't have seen two years into the future for an even better one. Also, how to do you write a book about the history of financial crises without paying homage to the one going on outside their doorstep?
Anyways, two years into the future the US almost defaulted on its debt for the simple reason that the Republican and Democratic parties couldn't get their act together to pass an increase of the debt ceiling - which is an artificial mechanism created solely to default on debt. It serves no useful purpose and could easily be done away with. It's like asking the question every so often, "We already spent all this money on the credit card, but should we pay the bill?" The sad thing is that it is about to happen again.
"Pre-election posturing and post-election uncertainty routinely exacerbate the challenge of developing a coherent and credible policy response."
.... *sigh* .... great.