The term “credit crunch” has entered the popular lexicon. Barely a day passes when the media is not opining on the topic. Rarely does an economic event have such a profound ripple effect on institutions and individuals throughout the world. Understandably, policy makers are working to respond to the credit crunch and its aftershocks.
Thoughtful policy in this area will flow from a solid grasp of the evolution of the issue and current trends in global financial and capital markets, as well as an understanding of the many new products and terms that even some of the financial world’s best and brightest have acknowledged they do not fully comprehend. This paper, then, is an effort to contribute to a better understanding of the issues, the terms, and the trends that gave rise to the credit crunch and which will continue to be relevant in the years ahead. It is not an advocacy paper or an effort to steer toward an outcome.
Precisely because the processes and events described are constantly changing, our goal is only to provide a foundation for further exploration and analysis by those tasked with writing and thinking about the credit crunch and developing appropriate public and private sector responses to prevent future dislocations.
Contents
Introduction
Origins of the Credit Crunch
The Subprime Crisis
Financial Institutions Begin Feeling the “Crunch”
Impact on Private Equity
Regulators Respond
Glossary of Terms
Sources Consulted
