MGMT 1005H Lecture Notes - Lecture 14: Credit Rating Agency, Predatory Lending, Real Estate Bubble
Document Summary
trillion in household wealth vanished, savings gone. 4 million families lost homes to foreclosure, another 4 million in the process. Housing bubble low interest rates, easy/available credit, toxic mortgages. September 2008 failure of lehman brothers and collapse of aig. Debt in financial sector: 1978-2008= trillion to trillion, too big to fail . Nation set an agressive home-ownership goals in 90"s and early 2000"s. Ignored warnings and failed to question evolving risks. Exponential growth in financial firms" trading activities. Federal reserve didn"t prohibit the flow of toxic mortgages, should have set mortgage-lending standards. Sec could have required more capital and stopped risky practices at big investment banks. Federal reserve bank ny could have slowed citigroup"s excesses beforehand. Policymakers/regulators could"ve stopped the runaway mortgage securitization train. Took too much risk while thinking about innovation. Intense competition and quick money were short-term rewards.
