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The Financial Crisis: Causes and Lessons - Ending Government Bailouts as We Know Them Part I – The Crisis

8 Pages Posted: 11 Dec 2009 Last revised: 6 Aug 2010

Kenneth E. Scott

Stanford Law School

Date Written: December 10, 2009

Abstract

A lot happened even before the perceived beginning of this crisis in 2007, so although the events are recent, I will review the period from 2001 to date, as part of our inquiry into the lessons to be learned. Much of it is probably familiar, but worth revisiting. This necessarily simplified account is divided 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. The goal is to lay 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

JEL Classification: G10, G14, G18, G28, G38

Suggested Citation

Scott, Kenneth E., The Financial Crisis: Causes and Lessons - Ending Government Bailouts as We Know Them Part I – The Crisis (December 10, 2009). Rock Center for Corporate Governance at Stanford University Working Paper No. 67; Stanford Law and Economics Olin Working Paper; Journal of Applied Corporate Finance, Vol. 22, No. 3, Summer 2010. Available at SSRN: https://ssrn.com/abstract=1521610 or http://dx.doi.org/10.2139/ssrn.1521610

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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