The Financial Crisis: Causes and Lessons - Ending Government Bailouts as We Know Them Part I – The Crisis
Kenneth E. Scott
Stanford Law School
December 10, 2009
Rock Center for Corporate Governance at Stanford University Working Paper No. 67
Stanford Law and Economics Olin Working Paper
Journal of Applied Corporate Finance, Vol. 22, No. 3, Summer 2010
A lot happened even before the perceived beginning of this crisis in 2007, so although the events are recent, I will review the period from 2001 to date, as part of our inquiry into the lessons to be learned. Much of it is probably familiar, but worth revisiting. This necessarily simplified account is divided into 3 stages: First, a look at the key factors that led to the increasing riskiness of US home mortgages; second, how those risks were transmitted as securities from US housing lenders to institutional investors around the globe; and third, how those risks led to huge losses and created a credit crunch that moved the impact from the financial economy to the real economy. The goal is to lay a factual foundation for deriving the lessons that ought to be taken away from this very expensive experience.
Number of Pages in PDF File: 8
Keywords: crisis, financial crisis, economy, securities, investors, credit crunch
JEL Classification: G10, G14, G18, G28, G38
Date posted: December 11, 2009 ; Last revised: August 6, 2010
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