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Lecture 14

ECON 310 Lecture 14: Econ310F16 Lecture 14

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Department
Economics
Course
ECON 310
Professor
David Cox
Semester
Spring

Description
Dis SSIO ISIS 2002/2008 tember and taber 20op was wars financial crisis globa/ institutions in period of a week or two Ben Bernanke Serve Claim /2006- 2014 Course AS over. Ben Bernanke, Gunge b Aet David Wessel, Trt Red we Meat panic. On Andrew S leia a long book maybe l too bis to read based on Michael Lewis The Big Short aud hudve. nuisike Dis SSIO ISIS 2002/2008 tember and taber 20op was wars financial crisis globa/ institutions in period of a week or two Ben Bernanke Serve Claim /2006- 2014 Course AS over. Ben Bernanke, Gunge b Aet David Wessel, Trt Red we Meat panic. On Andrew S leia a long book maybe l too bis to read based on Michael Lewis The Big Short aud hudve. nuisikeof 2007 Link behween us housing goua shadow brer kring 2000 2004 S. housing prices increased 'una ya nae feet loans risk bomowers 2. 2004 2006 as housing prices hnue itcase u -ph, 4e mortgages MEure example tranches MRS Issuing Home FREDG Economic Data Releases S&P/Case-Shiller Home Price Indices S&P/Case-Shiller U.S. National Home Price IndexO 2015-01: 166.66 Index January 2000 100 K+ see more) Monthly, Not Seasonally Adjusted, CSUSHPINSA, Updated: 2015-03-31 9:06 AM CDT cuck and drag in the plot area cr select dates: 1yr ISyr l 10yr l Max 1975-01-01 to 2015-01-01 FRED S&P/Case-Shiller U.S. National Home Price Indexc 1980 1985 1990 1995 2000 2005 2010 2015 Source S&P Dow Jones Indices LLC Shaded areas indicate US recessions -2015 research stlouisfed.org Notes Graph Share Export Cute Shaded areas represent S. recessions. chart Tndl August 106. 52. 2000 +73% August 2006 18 16 32. ngust 2008 of 2007 Link behween us housing goua shadow brer kring 2000 2004 S. housing prices increased 'una ya nae feet loans risk bomowers 2. 2004 2006 as housing prices hnue itcase u -ph, 4e mortgages MEure example tranches MRS Issuing Home FREDG Economic Data Releases S&P/Case-Shiller Home Price Indices S&P/Case-Shiller U.S. National Home Price IndexO 2015-01: 166.66 Index January 2000 100 K+ see more) Monthly, Not Seasonally Adjusted, CSUSHPINSA, Updated: 2015-03-31 9:06 AM CDT cuck and drag in the plot area cr select dates: 1yr ISyr l 10yr l Max 1975-01-01 to 2015-01-01 FRED S&P/Case-Shiller U.S. National Home Price Indexc 1980 1985 1990 1995 2000 2005 2010 2015 Source S&P Dow Jones Indices LLC Shaded areas indicate US recessions -2015 research stlouisfed.org Notes Graph Share Export Cute Shaded areas represent S. recessions. chart Tndl August 106. 52. 2000 +73% August 2006 18 16 32. ngust 2008senior tranche r of MBS backal by Subs p/inte unfortgages are ta fing agen cies Nob. Aaron prices 2. There lots of laws were broken in of extending, subp inte "hvor aware of what were Situahan 2006 hy udreds of billions of dollkirs warf of mostgages have been Y4ng4 ages are er ended singly, issued es are held b dealers and CSuia ercial buuks repurchase avreements Financi al Crisis beginning in middle of 20 as housing prices begin to expected across August 2007 to September zaog as a pesalt de ler bin ks tace. increasing di epo Cash lenders. demand higher using MBS colieknel oleilir banks senior tranche r of MBS backal by Subs p/inte unfortgages are ta fing agen cies Nob. Aaron prices 2. There lots of laws were broken in of extending, subp inte "hvor aware of what were Situahan 2006 hy udreds of billions of dollkirs warf of mostgages have been Y4ng4 ages are er ended singly, issued es are held b dealers and CSuia ercial buuks repurchase avreements Financi al Crisis beginning in middle of 20 as housing prices begin to expected across August 2007 to September zaog as a pesalt de ler bin ks tace. increasing di epo Cash lenders. demand higher using MBS colieknel oleilir banksAverage Repo- kkinoet C Gorton A Merrick /Journal of Financial Economics 104 (2012) 425-451 25% 15% Fi The repo-haircut inden. The repo-haircut index is the equally weighted average harcut or all nine asset classea-noauded m Table 2, Panel D. index represents hincat applied when using MBS's as collateral in Repo Cash bomowin O O Repo cash lenders shorten. mafurily of repo loans by end August 200 a large proponton are vo f overnight repo cash lenders cay ou choose Key Event of inancial Chsis Sepe 2008 Failure of abaler bank Lehman Borkars Lehman tAces lange losses repo lenders Ruse cling Leh 4 u ehuin declares bankruptcy but was not bailed out by CMS Fea Tan Treasury nyankets Average Repo- kkinoet C Gorton A Merrick /Journal of Financial Economics 104 (2012) 425-451 25% 15% Fi The repo-haircut
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