28 Pages Posted: 10 Nov 2009 Last revised: 19 Nov 2009
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: Suggested Citation
Scott, Kenneth E., Lessons from the Crisis (November 10, 2009). Stanford Law and Economics Olin Working Paper No. 385. Available at SSRN: https://ssrn.com/abstract=1503631 or http://dx.doi.org/10.2139/ssrn.1503631