Sub-prime crisis in U.S. is currently the hottest topic of discussion around the globe. It started as a financial crisis and quickly assumed the form of general economic crisis. Some termed it as the beginning of “the second great depression” because of the enormous dislocation it has created across continents.
Such portents now appear to become a reality. As put aptly by Rakesh Mohan, “Even as every passing day unravels a little more of the underlying forces at work the complex nature of the derivatives used; the high degree of leveraging on poor, light or even absent collateral; the underestimation of risk pervading financial markets; the surprisingly sizeable exposures of large financial institutions to some of the debt instruments and derivatives in question; and the speed of contagion.” It is the resultant of a multiplicity of factors. It has serious implications for the global economy.
The first section deals with the mortgage lending process in the US. Mortgage securitization and the Housing bubble are dealt with the second and third sections respectively. In the fourth section, we discuss emergence of “unknown unknown”. Cost of securitization and responsibility of crisis are discussed in the next two sections.
The following sections reveal how various entities indulged in ‘Passing the buck’. The impact is studied in specific terms, as the overall impact and the effect on the global economy in the next three sections. Section XI and XII respectively explain the role of central banks all over the globe and the lessons drawn from the crisis. The final section contains the summary and conclusion.
Download
PDF Ebook Sub Prime Crisis in US: Emergence, impact and lessons
