POLSCI 1G06 Chapter Notes -Subprime Mortgage Crisis, Systemic Risk, Prime Rate
19 Mar 2013
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Document Summary
Thesis : the glass stegall act repeal caused the subprime mortgage crisis which resulted to the largest recessions in american history since the great depression. This was a way to protect the assets of commercial banks. Commercial banks were for everyday people who kept their personal accounts while investment banks were mainly for stock portfolio and trading purpose. Glass stegall was instill to prevent commercial banks from trading in the stock markets and prevent another event like the great depression. However in it was repealed in 1999 during the clinton administration. Sub-prime lending/mortgages: sub-prime mortgages were loans given to individuals with poor credit , people who could not pay back previous loans and defaulted . The loans had a higher interest rate about two to three percent then the average prime rate mortgages most. Ninja loans ; no income, no job , no assests. Deregulations: removal of government power in corporation for more competition.
