Alternative View of the Current (2008) Crisis in the US Financial System
22 Pages Posted: 25 Jun 2008 Last revised: 21 Jul 2008
Date Written: June 23, 2008
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.
Keywords: Real estate, crisis, contagion
JEL Classification: D12, H30, H31, R31
Suggested Citation: Suggested Citation