The U.S. Subprime Mortgage Crisis

The subprime mortgage crisis ranks among the most serious economic events affecting the United States since the great depression of the 1930s. This study analyzes key issues raised by the crisis at three levels: (i) issues directly and specifically relating to subprime mortgage lending; (ii) issues relating to the securitization of subprime mortgages; and (iii) issues affecting financial markets and institutions. These issues are fundamental to risk bearing, sharing, and transfer in financial markets and institutions around the world. Many of the issues raised by the U.S. subprime crisis also apply to high-risk loan markets in developing countries. The framework applied in the paper analyzes subprime mortgage lending as a major financial market innovation. Although conditions were conducive for subprime lending to arise as a financial innovation, financial innovations are necessarily risky undertakings, all the more so when they create new classes of risky loans and securities. The lessons learned from the crisis can thus be usefully applied to issues of the growth and development of emerging economies, as well as pointing the way to the design of new and efficient policies for subprime lending in the developed economies.

Bibliographic Details

Main Author:	Jaffee, Dwight M.
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2008
Subjects:	ACCOUNTING, ARBITRAGE, ASSET CLASS, ASSET MANAGERS, ASSET-BACKED SECURITIES, ASYMMETRIC INFORMATION, AUCTION, AUTO LOANS, BAILOUT, BANK INVESTORS, BANK LENDERS, BANKING REGULATIONS, BANKING SYSTEM, BANKRUPTCY, BENEFICIARIES, BORROWER, BROKERS, CAPITAL MARKET, CAPITAL MARKETS, CAPITAL REQUIREMENTS, CATASTROPHE BONDS, COLLATERAL, COMMERCIAL BANK, COMMERCIAL BANKS, COMMERCIAL MORTGAGE, COMMERCIAL MORTGAGES, COMMERCIAL PAPER, COMMERCIAL PAPER MARKET, COMPETITIVE MARKET, CONSUMER BORROWERS, CONSUMER LOANS, CONSUMER PROTECTION, CONSUMER PROTECTION LEGISLATION, CONTRACT DESIGN, CONTRACT DESIGNS, COUPON, COUPONS, CREDIT CARD, CREDIT DEFAULT, CREDIT DEFAULT SWAPS, CREDIT ENHANCEMENTS, CREDIT QUALITY, CREDIT RATING, CREDIT RATING AGENCIES, CREDIT RATINGS, CREDITORS, CREDITWORTHINESS, CURRENCY, DEBT, DEBT INSTRUMENTS, DEBT OBLIGATION, DEBT OBLIGATIONS, DEBT OUTSTANDING, DEBT RATIOS, DEBT SECURITIES, DEBT SERVICE, DEFAULT PROBABILITIES, DEFAULT RATE, DEFAULT RATES, DEFAULT RISK, DEFAULTS, DEFICITS, DEPOSIT, DEPOSITORY INSTITUTIONS, DEPOSITS, DERIVATIVE, DERIVATIVE INSTRUMENTS, DERIVATIVE MARKET, DERIVATIVE MARKETS, DERIVATIVES, DEVELOPING COUNTRIES, DIVERSIFIED INVESTORS, DIVERSIFIED PORTFOLIOS, DUE DILIGENCE, ECONOMIC GROWTH, EMERGING ECONOMIES, EMERGING ECONOMY, EXCHANGE COMMISSION, EXPENDITURES, FEDERAL RESERVE, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL DISTRESS, FINANCIAL INSTITUTIONS, FINANCIAL MARKET, FINANCIAL MARKETS, FINANCIAL RISK, FINANCIAL SERVICE PROVIDERS, FINANCIAL SYSTEM, FISCAL POLICIES, FLOATING RATES, FORECLOSURE, FORECLOSURES, FOREIGN CAPITAL, FOREIGN EXCHANGE, FRAUD, FUTURES, FUTURES MARKET, GOVERNMENT GUARANTEE, GOVERNMENT GUARANTEES, GOVERNMENT REGULATION, HEDGE FUND, HEDGE FUNDS, HOLDING, HOME LOAN, HOME MORTGAGE, HOME MORTGAGES, HOMEOWNERSHIP, ILLIQUID MARKETS, ILLIQUIDITY, INDIVIDUAL INVESTORS, INDIVIDUAL LOAN, INFLATION, INSTITUTIONAL INVESTORS, INSTRUMENT, INSURANCE, INTEREST RATE, INTEREST RATE RISK, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INTERNATIONAL SETTLEMENTS, INVENTORY, INVESTMENT ACTIVITIES, INVESTMENT BANK, INVESTMENT BANKS, INVESTMENT DECISIONS, INVESTMENT FUNDS, INVESTMENT POLICY, INVESTMENT PORTFOLIOS, INVESTMENT STRATEGIES, INVESTMENT STRATEGY, INVESTMENT VEHICLES, INVESTOR LOSSES, LEGAL PROHIBITIONS, LEGAL SYSTEM, LENDER, LENDERS, LIABILITY, LIEN, LINE OF CREDIT, LIQUIDATION, LIQUIDITY CRISES, LOAN, LOAN APPLICATION, LOAN APPLICATIONS, LOAN DEFAULT, LOAN DEFAULTS, LOAN DEMANDS, LOAN MARKETS, LOAN OFFICERS, LOAN PERFORMANCE, LOAN TERMS, LOAN VOLUMES, LOANABLE FUNDS, LOCAL BANK, LONG TERM CAPITAL, LONG-TERM CAPITAL, LONG-TERM DEBT, MARK TO MARKET, MARK TO MARKET ACCOUNTING, MARKET DEVELOPMENTS, MARKET DISCIPLINE, MARKET ECONOMY, MARKET FAILURES, MARKET LIQUIDITY, MARKET PARTICIPANTS, MARKET PRICES, MARKET STABILITY, MARKET TRADING, MARKET VALUE, MATURITY, MATURITY MISMATCH, MATURITY MISMATCHES, MONETARY AUTHORITY, MONETARY POLICIES, MONETARY POLICY, MORAL HAZARD, MORTGAGE, MORTGAGE BONDS, MORTGAGE FINANCE, MORTGAGE LOAN, MORTGAGE LOANS, MORTGAGE MARKET, MORTGAGE MARKETS, MORTGAGE-BACKED SECURITIES, MORTGAGES, NATURAL DISASTER, NATURAL DISASTERS, OUTSTANDING AMOUNT, OUTSTANDING LOANS, PENSION, PORTFOLIO, PORTFOLIOS, PRINCIPAL PAYMENTS, PROBABILITY OF DEFAULT, PROPERTY RIGHTS, PRUDENTIAL REGULATION, REAL ESTATE COLLATERAL, REAL ESTATE LOANS, REGULATORY FRAMEWORK, REGULATORY STRUCTURE, RETURN, RETURNS, RISK ASSESSMENTS, RISK MANAGEMENT, RISK OF DEFAULT, RISKY LOAN, RISKY LOANS, RISKY SECURITIES, SECURITIES, SECURITIES INDUSTRY, SETTLEMENT, SETTLEMENT SYSTEMS, SHORT-TERM BORROWINGS, STOCK BROKERS, STOCK MARKET, TAX, TRADING, TRANCHE, TRANCHES, TRANSACTION, TRANSACTION COSTS, TRANSITION ECONOMIES, TREASURY, TREASURY BONDS, UNDERLYING MORTGAGES, UNDERWRITERS, VARIABLE RATE,
Online Access:	http://documents.worldbank.org/curated/en/612021468130801823/The-U-S-subprime-mortgage-crisis-issues-raised-and-lessons-learned https://hdl.handle.net/10986/28008
Tags:	Add Tag No Tags, Be the first to tag this record!