US Financial Crisis
Housing Finance & the Securitization of Mortgages – Fannie Mae and Freddie Mac expanded the depth of mortgage markets by popularizing securitization of mortgages: pooling together mortgages into a lower risk, marketable security. Read more…
The Subprime Mortgage Market – The explosive growth of the subprime mortgage market was due primarily to the ability to securitize and sell off those loans as Collateralized Mortgage Obligations (CMOs). Read more…
The Shadow Banking System– So called “Shadow Banks”, financial institutions not subject to bank regulations, aggressively sold subprime CMOs, setting the stage for the financial crisis. Read more…
The Collapse – The financial crisis began when the subprime mortgage market collapsed, causing a collapse in the value of the corresponding CMOs. Read more…
The Credit Crisis – The implosion of the CMO market caused a contraction of lending due to uncertainty about the liabilities borrowers might be holding. Read more…
The Federal Bailout – $700 billion Troubled Assets Relief Program (TARP) created to buy up toxic assets and provide new equity to financial businesses. Read more…
The US Economic Crisis
The US Recession: While the recession formally started in December 2007, there were signs of economic slowdown as far back as early 2006, beginning in the housing market. Read more…
Why is this Recession So Serious? – The current US recession is so serious because it originated with the financial crisis, and because of negative feedback effects (i.e. “vicious circles”) Read more…
The Federal Stimulus – To speed economic recovery, the US government is conducting a massive fiscal stimulus to offset the collapse in private sector investment spending. Read more…
