Alternative View of the Current (2008) Crisis in the US Financial System

Abstract:     
In my essay, I formulate an alternative scenario for the current crisis of the US financial system. Unintended and poorly understood consequences of the Gramm-Leach-Bliley (1999) banking reform and, especially, the Bankruptcy Abuse Prevention and Consumer Protection Act (2005) created numerous perverse incentives in the US financial industry.

I argue that the trigger for the financial collapse was the refinancing of the short-term consumer debt through home equity loans.

Number of Pages in PDF File: 22

Keywords: Real estate, crisis, contagion

JEL Classification: D12, H30, H31, R31

working papers series