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Lessons from the Crisis

28 Pages Posted: 10 Nov 2009 Last revised: 19 Nov 2009

Kenneth E. Scott

Stanford Law School

Date Written: November 10, 2009


A lot happened even before the perceived beginning of this crisis in 2007, so although the events are recent, I will give an overview from a US perspective of the period from 2001 to date, in our search for the lessons to be learned. Much of it is probably familiar, but worth revisiting.

I will break this necessarily simplified account 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 and produced a severe recession. Then we will have a factual foundation for deriving the lessons that ought to be taken away from this very expensive experience.

Keywords: crisis, financial crisis, economy, securities, investors, credit crunch

Suggested Citation

Scott, Kenneth E., Lessons from the Crisis (November 10, 2009). Stanford Law and Economics Olin Working Paper No. 385. Available at SSRN: or

Kenneth E. Scott (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-3070 (Phone)
650-725-0253 (Fax)

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