On the political economy of the financial crisis and bailout of 2008–2009
- 4.3k Downloads
U.S. policies to promote home ownership and other banking regulatory decisions helped to create a highly leveraged international market for mortgage-based securities. Declines in the price of housing, consequently, had major effects on the balance sheets and portfolios of financial institutions throughout the world.
The political response to the financial crisis has been rapid and large. In general, differences in the effectiveness of government policies show the advantage of standing institutions at crisis management relative to innovative legislation.
KeywordsPolitical economy Crisis management Regulatory failure Financial markets Housing markets Credit markets Asset bubbles Public choice
JEL ClassificationD72 D73 D8 K2
- Abraham, J. M., & Hendershott, P. H. (1994). Bubbles in metropolitan housing markets. Journal of Housing Research, 7, 191–209. Google Scholar
- Fannie Mae (2006). Annual Report, Washington DC. Google Scholar
- Fannie Mae (2007). Annual report, Washington DC. Google Scholar
- Freddie Mac (2007). Annual Report, Washington DC. Google Scholar
- Bajaj, V., & Labaton, S. (2009). Big risks for U.S. in trying to value bad bank assets. New York Times (February 1). Available at: http://www.nytimes.com/2009/02/02/business/economy/02value.html?_r=1.
- Bernanke, B. S. (2008). Mortgage delinquencies and foreclosures. Speech at Columbia Business School (May 5). Available at: www.federalreserve.gov/newsevents/speech/Bernanke20080505a.htm#f2.
- Bernanke, B. S. (2009). Federal Reserve programs to strengthen credit markets and the economy. Testimony before the House Committee on Financial Services, U.S. House of Representatives (February 10). Available at: federalrserve.gov/newsevents/testimony/bernanke20090210a.htm.
- Case, K. E., & Shiller, R. J. (1989). The efficiency of the market for single family homes. American Economic Review, 79, 125–137. Google Scholar
- Case, K. E., & Shiller, R. J. (2003). Is there a bubble in the housing market? Cowles foundation paper 1089, Yale University. Google Scholar
- Case, K. E., Quigley, J. M., & Shiller, R. J. (2001). Comparing wealth effects: the stock market versus the housing market. Cowles Foundation Discussion Paper No. 1335, Yale University. Google Scholar
- Cecchetti, S. G. (2008). Measuring the macroeconomic risks posed by asset price booms. In J. Y. Cambell (Ed.), Asset prices and monetary policy (pp. 9–34). Chicago: University of Chicago Press. Google Scholar
- Chari, V. V., Christiano, L., & Kehoe, P. J. (2008). Facts and myths about the financial crisis of 2008. Federal Reserve Bank of Minneapolis, Working Paper 666 (October). Available at: www.minneapolisfed.org/research/WP/WP666.pdf.
- Crippen, D. L. (2001a). Federal subsidies and the housing GSEs. Congressional Budget Office Report, Washington. Available at: www.cbo.gov/ftpdocs/28xx/doc2841/GSEs.pdf.
- Crippen, D. L. (2001b). Federal subsidies for the housing GSEs. Testimony before the Subcommittee on Capital Markets, U.S. House of Representatives. Available at: www.cbo.gov/doc.cfm?index=2839&type=0.
- Cowan, C. L. (2003). History and overview of securitization. Testimony before the housing and community opportunity subcommittee on financial institutions and consumer credit. U.S. House of Representatives (November 5). Google Scholar
- Day, K. (2006). Study finds ‘extensive’ fraud at Fannie Mae. Washington Post (May 24), A01. Google Scholar
- Dickerson, C. H. (2004). Report of findings to date, special examination of Fannie Mae. Office of Federal Housing Enterprise Oversight, Washington DC. Google Scholar
- Gjerstad, S., & Smith, V. L. (2009). From bubble to depression. Wall Street Journal (April 6), A15. Google Scholar
- Gramlich, E. M. (2000). Predatory lending practices. Testimony before the Committee on Banking and Financial Services, U.S. House of Representatives (May 24). Google Scholar
- Greenspan, A. (2003). Corporate governance. Speech at the 2003 conference on bank structure and competition, Chicago Illinois (May 8). Available at: http://www.federalreserve.gov/boarddocs/speeches/2003/20030508/default.htm.
- Greenspan, A. (2004). Government-sponsored enterprises. Testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs (February 24). Available at: http://www.federalreserve.gov/boarddocs/testimony/2004/20040224/default.htm.
- General Accounting Office Report to the Congress (July 1996). Financial audit: Resolution trust corporation’s 1995 and 1994 financial statements. Washington DC. Available at: http://www.gao.gov/archive/1996/ai96123.pdf.
- Higgs, R. (1987). Crisis and leviathan. Oxford: Oxford University Press. Google Scholar
- Himmelberg, C. P., Mayer, C. J., & Sinai, T. M. (2004). Assessing high house prices: bubbles, fundamentals, and misperceptions. Federal Reserve Board Staff Report 218. Google Scholar
- Historical census of housing tables: home ownership, (2004). U.S. Bureau of the Census, Washington DC. Available at: http://www.census.gov/hhes/www/housing/census/historic/owner.html.
- Irwin, N., & Cho, D. (2008). U.S. offers citigroup expansive safety net. Washington Post (November 24), A01. Available at: www.washingtonpost.com/wpdyn/content/article/2008/11/23/AR2008112301665.html.
- Jenkinson, N. (2008). Ratings in structured finance: what went wrong and what can be done to address shortcomings? CGFS Papers 32. Basel, Switzerland: Committee on the Global Financial System. Google Scholar
- Kennickell, A. B. (2006). Currents and undercurrents: changes in the distribution of wealth 1989–2004. Washington DC: Federal Reserve Board Report (August 2). Google Scholar
- Labaton, S. (2008). Agency’s ’04 rule lets banks pile up new debt. New York Times (October 3). Available at: http://www.nytimes.com/2008/10/03/business/03sec.html?_r=2&sq=fi.
- Mason, D. L. (2004). From buildings and loans to bail outs: A history of the American savings and loan industry, 1831–1995. Cambridge: Cambridge University Press. Google Scholar
- Mason, J. R., & Rosner, J. (2007). How resilient are mortgage-backed securities to collateralized debt obligation market disruptions? Social Science Research Network (SSRN) working paper 1027472. Google Scholar
- Merced, M. J., & Story, L. (2009). Nearly 700 at Merrill in million-dollar club. New York Times (February 11). Available at: www.nytimes.com/2009/02/12/business/12merrill.html?scp=2&sq=bonuses&st=cse.
- Niskanen, W. A. (1971). Bureaucracy and representative government. Chicago: Aldine, Atherton. Google Scholar
- Olson, M. (1965). Logic of collective action: public goods and the theory of groups. Cambridge MA: Harvard University Press. Google Scholar
- System Open Market Account Holdings. Federal Reserve Bank of New York. Available at: http://www.newyorkfed.org/markets/soma/sysopen_accholdings.html.
- Yellen, J. (2005). Housing bubbles and monetary policy. Speech, October 21. Federal Reserve Bank of San Francisco. Google Scholar
- U.S. Treasury International Capital System Report on Foreign Portfolio Holdings of U.S. Securities, Department of Housing and Urban Development report (May 2007). Washington DC. Available at: www.hud.gov/content/releases/07-072table.pdf.