In , he briefly became its chairman. But the new documents cast fresh light on the way the White House was first ushered toward deregulation by the tight group of Rubin allies. In a letter received by the president on 19 May, Clinton is again given just three days to decide whether to proceed with the deregulation agenda.
Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Anytime something bad happens, it doesn't take long before people start to assign blame.
It could be as simple as a bad trade or an investment that no one thought would bomb. Some companies have banked on a product they launched that just never took off, putting a huge dent in their bottom lines. But some events have such a devastating effect that they end up having an effect on the overall economy. That's what happened with the subprime mortgage market, which led to the Great Recession.
But who do you blame? When it comes to the subprime mortgage crisis, there was no single entity or individual at whom we could point the finger. Instead, this mess was the collective creation of the world's central banks, homeowners, lenders, credit rating agencies, underwriters, and investors.
Read on to find out more about each individual player and what role they played in the crisis. Before we look at the key players and components that led to the subprime mortgage crisis, it's important to go back a little further and examine the events that led up to it. In early , the economy was at risk of a deep recession after the dotcom bubble burst. Junior companies and startups that didn't produce any revenue yet were getting money from venture capitalists, and hundreds of companies went public.
This situation was compounded by the September 11 terrorist attacks in Central banks around the world tried to stimulate the economy as a response. They created capital liquidity through a reduction in interest rates.
Enter the subprime mortgage. Lenders took on greater risks, too, approving subprime mortgage loans to borrowers with poor credit, no assets, and—at times—no income.
But consumer demand drove the housing bubble to all-time highs in the summer of , which ultimately collapsed the following summer.
The subprime mortgage crisis didn't just hurt homeowners, it had a ripple effect on the global economy leading to the Great Recession which lasted between and After the housing bubble burst, many homeowners found themselves stuck with mortgage payments they just couldn't afford. Their only recourse was to default. This led to the breakdown of the mortgage-backed security market , which were blocks of securities backed by these mortgages, sold to investors who were hungry for great returns.
Investors lost money, as did banks, with many teetering on the brink of bankruptcy. Homeowners who defaulted ended up in foreclosure. And the downturn spilled into other parts of the economy—a drop in employment, more decreases in economic growth as well as consumer spending.
The U. Let's take a look at the key players. Most of the blame is on the mortgage originators or the lenders. That's because they were responsible for creating these problems. There are other reasons to doubt that subprime borrowers were responsible for the financial crisis. A third argument, the one Kudlow and Moore cite, is that declining lending standards by Fannie and Freddie brought about by the requirements of the CRA helped fuel subprime loans.
The reason Fannie and Freddie were losing market share is that loan standards on mortgages issued by private lenders were falling. Further, the default rates in these areas should have been worse than other regions. What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The attack on the CRA began in and quickly spread to conservative information outlets.
Democrats never got the chance to vote against it or to mount a filibuster to block it. By the time McCain signed on to the legislation, it was too late to prevent the crisis anyway. McCain added his name on May 25, , when the housing bubble had already nearly peaked. The U. Screwing it up takes a great deal of cooperation.
Claiming that a single piece of legislation was responsible for or could have averted the crisis is just political grandstanding.
We have no advice to offer on how best to solve the financial crisis. But these sorts of partisan caricatures can only make the task more difficult. Benston, George J. Oxford University Press, Tabarrok, Alexander. The Rockefellers. Kuttner, Robert. Accessed 29 September Bartiromo, Maria.
September Bianco, Katalina M.
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