THE FEDERAL RESERVE AND THE FINANCIAL CRISIS Lecture 2: The Federal Reserve after World War II 1. Early Challenges 2. The Great Moderation 3. Origins of the Recent Crisis What Is the Mission of a Central Bank? • Macroeconomic stability - All central banks use monetary policy to strive for low and stable inflation; most a so use monetary policy to try to promote stable growth in output and employment. • Financial stability - Central banks try to ensure that the nation’s financial system
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4) Did subprime mortgage loans contribute to the housing bubble? Why did the bubble burst? What were consequences of the housing bust to borrowers‚ loan originators‚ and MBS and CDO holders? Did subprime mortgages contribute to the U.S. financial crisis of 2008? Subprime Mortgage loans did contribute to the bubble and crash but they were just the cards played by the government and the policies that rule them. The department of housing and urban development was pushing national homeownership since
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Econ 2035 CHAPTER 9: FINANCIAL CRISES AND THE SUBPRIME MELTDOWN Outline Want to answer the following ques9ons: • Why the financial crisis occur? • Why have financial crises been so prevalent throughout U.S. history and in other countries? • What insights do they provide on the current crisis?
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flow of credit to businesses and consumers and the onset of a severe global recession. There were many causes of the crisis‚ with commentators assigning different levels of blame to financial institutions‚ regulators‚ credit agencies‚ government housing policies‚ and consumers‚ among others.[1] A proximate cause was the rise in subprime lending. The percentage of lower-quality subprime mortgages originated during a given year rose from the historical 8% or lower range to approximately 20% from 2004
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have comparable deficits 1997 • Asian Crisis as turningpoint. Developing Asia and the newly industrialized Asian group went to surplusses afterwards 2000 • Increasing commodity prices due to worldwide economic growth and the dot-com boom • Current account surplusses in the oil-exporting Middle East US deficit increased from 2‚0% in 1997 to 4‚3% in 2000 Source: „Global Imbalances and the Financial Crisis:
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Higher education buble: The higher education bubble is a hypothesis that there is a speculative boom and bust phenomenon in the field of higher education‚ and that there is the risk of an economic bubble in higher education that could have unintended consequence in the broader economy like student loan bubble that we will discuss today. Student loan bubble is a consequence of higher education bubble. According to the theory‚ while college tuition payments are rising‚ the rate of return of a college
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Deregulation Created the Subprime Mortgage Crisis The mid-1990s saw an economic revival. What incited this activity was a technology boom like no other. It created a new era of electronics and computing. There were cell phones‚ desktop and laptop computers‚ the Internet‚ electronic games‚ flat panel TVs and major advances in business software and efficiencies. The housing industry was a big benefactor of this new economy. Home prices began to rise again by 1996. The rate of home ownership during the
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1. Background—mortgage market The immediate reason or trigger of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006.High default rates on “subprime” and adjustable-rate mortgages ‚ began to increase quickly thereafter. An increase in loan incentives‚ such as simple initial conditions and long-term trend of rising housing prices encouraged borrowers to increase the commitment that they will be able to quickly re-financing more favorable conditions
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real world is more complicated. Not all firms wish to maximise profits; they may seek to maximise market share or pursue other social / environmental objectives. Also people may not be rational but get caught up in irrational booms and busts (e.g. stock market booms‚ housing booms‚ dot com bubbles). Therefore there is a branch of economics known as behavioural economics. Macro Economics Macro economics is a term relating to nation wide economic problems. For example‚ the rate of inflation in a country
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Irish Financial Crisis has attracted much attention recently. Driven by booms in property and lending‚ it left the society with massive issues such as high unemployment‚ insolvent banks and huge government deficit(Kelly‚ 2010‚ P1). There are many debate surrounding on whether the crisis could be predicted and prevented. This essay will attempt to demonstrate that Irish Financial Crisis was both predictable and preventable. It will first state that Irish Financial Crisis was predictable through the
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