“Financial Crisis in the US and Beyond”
Coauthor(s): Robert Eisenbeis, Robert Litan.
Editors: Robert Litan
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The 2007-2009 financial crisis that started in the summer of 2007
had its origins in the US housing policies, the subprime mortgage
market in particular, and the end of the real estate bubble in the US. Careful consideration of the causes, consequences and policy responses suggest that various factors contributed to the severity of
the 2007-08 crisis, and experts disagree about the weights to attach to each in explaining what is now regarded as the most significant
economic contraction since the Great Depression. The effectiveness
of the various policy responses remains a matter of controversy, too,
but one fact is not in dispute: the bailouts and subsidies involved in
supporting large financial and non-financial institutions alike have
reduced wealth and transferred resources from taxpayers to creditors,
and in some cases, to the stockholders and management of those
troubled institutions. The problems, and arguably some of the policy
responses, may have unintentionally created an adverse feedback
from the financial to the real sector of the economy. This paper attempts to provide greater clarity about the main causes of the crisis, the early signs of problems that were brewing, what measures US policy makers took in response to the crisis and its aftermath, and
what lessons have been learned.
Source: World in Crisis: Insights from Six Shadow Financial Regulatory Committees From Around the World
Calomiris, Charles, Robert Eisenbeis, and Robert Litan. "Financial Crisis in the US and Beyond." In World in Crisis: Insights from Six Shadow Financial Regulatory Committees From Around the World. Ed. Robert Litan. Philadelphia: FIC Press, November 2011.