Proposals Concerning the Current Financial Crisis

Posted: 31 Jan 2009

See all articles by Harry Markowitz

Harry Markowitz

University of California at San Diego

Date Written: January, 30 2009

Abstract

A basic cause of the current financial crisis was the mandate from the U.S. Congress to the Federal National Mortgage Association (Fannie Mae) to increase its support of low-income housing. This mandate led to a lowering of lending standards, which encouraged home buyers to spend beyond their means. The problem was aggravated by novel, obscure, highly leveraged financial instruments that were not well understood by either lenders or borrowers. At least two steps are required for the solution to this crisis: (1) Congress should instruct Fannie Mae that the safety of the financial system must take priority over the objective of providing low-income housing, and (2) this article's modest proposal for bringing transparency to the tangle of financial instruments should be implemented.

Keywords: Advocacy, Regulatory, and Legislative Issues: Advocacy Issues, Regulatory and Legislative Activities

Suggested Citation

Markowitz, Harry, Proposals Concerning the Current Financial Crisis (January, 30 2009). Financial Analysts Journal, Vol. 65, No. 1, 2009. Available at SSRN: https://ssrn.com/abstract=1335444

Harry Markowitz (Contact Author)

University of California at San Diego ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
(858) 534-3383 (Phone)

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