Review for Exam 2
October 15, 2019
Review:
- Culprits, only consumers were punished
- Exam 2 on Thu, Oct 17
Exam 2 Topics:
- 2008 Housing/Mortgage/Financial Crisis
- Monetary Policy
- Federal Reserve
- Alan Greenspan
- Ben Bernanke
- Securitization and Derivatives
- Mortgage backed securities (MBS)
- Collateralized Debt Obligations (CDOs)
- Credit Default Swaps
- Subprime Lending
- Low-income borrowers
- Predatory lending
- Loan origination fees/bonuses
- Deregulation
- Laissez-faire capitalism, Ayn Rand, Reaganomics
- 1999 Gramm-Leach-Bliley Act – repeals 1933 Glass-Steagall Act
- 2000 Commodity Futures Modernization Act – prevents regulation of most derivatives
- 2004 SEC proposes “voluntary regulation” and lower capital requirements
- Mortgage Meltdown
- Skyrocketing default rates
- Dropping property values
- Strategic default
- Neighborhood deterioration
- Crisis Culprits
- Banks’ Excessive Leverage
- Subprime Lenders
- Federal Reserve Low Interest Rates
- Rating Agencies
- Secondary Mortgage Market
- Fannie Mae
- Freddie Mac
- Fiscal Policy
- Tax policy
- Spending policy
- 2017 Tax Reform
- Crime but no punishment on Wall Street
- No one went to jail
- Limited effort by Dept of Justice to pursue cases
- Missed opportunity to impose discipline
- Who’s cheating now?
- Recession
- Yield Inversion
- Unemployment Rate
- Credit expansion
- Housing Supply/Demand
Debate:
- Will housing prices fall if we have a deep recession?
- Robert Shiller on the next recession
- Vulnerability of the housing market
- Housing Boom?
Assignment:
- Study for Exam 2
