Of Subprimes and Subsidies: The Political Economy of the Financial Crisis
18 Pages Posted: 22 Sep 2008 Last revised: 11 Nov 2008
Date Written: October 2008
The US economy is in the early stages of what looks to be the worst financial and economic crisis since the Great Depression. Starting with the downturn in the housing market and rising foreclosures, the crisis has spread to Fannie and Freddie, the government sponsored enterprises, and to investment banks and other financial entities holding dodgy assets backed by collapsing real estate. In addition to the growing financial crisis, a number of other, related issues of concern keep appearing on the horizon. They include sustained global imbalances, the threat of growing prices of commodities and oil, and the ever-present disruptive impact of globalization. Is there any connecting thread between these crises? What are the underlying ideological and politico-economic factors that fed the growth of this crisis? This paper addresses these and other questions in a discussion starting with subprime mortgages and their causes and consequences.
Keywords: financial crisis, subprime mortgages, subsidies, securitization, political economy, interest rate
JEL Classification: E50, E60, G00, G21, H10, P16
Suggested Citation: Suggested Citation