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The subprime fiasco: Derivatives and ratings

Author

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  • Whalen, Christopher

Abstract

The easy-money policies of the Federal Reserve Board (the Fed) in the early part of the decade did fuel the mortgage bubble. More important in structural terms, however, was the advocacy by the Fed and other US bank regulators of over-the-counter derivatives dealing by the major US banks. Without the wonders of structured finance, there would have been no ‘demand pull’ surge for mortgage paper starting in the 2003 period, when buy-side investors began to clamour — no, scream — for higher risk-adjusted returns.

Suggested Citation

  • Whalen, Christopher, 2007. "The subprime fiasco: Derivatives and ratings," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 1(1), pages 10-11, December.
    • Handle: RePEc:aza:rmfi00:y:2007:v:1:i:1:p:10-11
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    More about this item

    Keywords

    subprime; mortgage; subprime; mortgage; derivatives; subprime; mortgage; derivatives; banks; bubble;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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