The Financial Crisis: An Inside View
AbstractThis paper reviews the policy response to the 2007â09 financial crisis from the perspective of a senior Treasury official at the time. Government agencies faced severe constraints in addressing the crisis: lack of legal authority for potentially helpful financial stabilization measures, a Congress reluctant to grant such authority, and the need to act quickly in the midst of a market panic. Treasury officials recognized the dangers arising from mounting foreclosures and worked to facilitate limited mortgage modifications, but going further was politically unacceptable because public funds would have gone to some irresponsible borrowers. The suddenness of Bear Stearnsâ collapse in March 2008 made rescue necessary and led to preparation of emergency options should conditions worsen. The Treasury saw Fannie Mae and Freddie Macâs rescue that summer as necessary to calm markets, despite the moral hazard created. After Lehman Brothers failed in September, the Treasury genuinely intended to buy illiquid securities from troubled institutions but turned to capital injections as the crisis deepened.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.
Volume (Year): 40 (2009)
Issue (Month): 1 (Spring) ()
Contact details of provider:
Postal: 1775 Massachusetts Ave NW, Washington DC 20036
Phone: (202) 797-6000
Fax: (202) 797-6004
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC
macroeconomics; financial crisis; U.S. government; Bear Stearns; Lehman Brothers; Fannie Mae; Freddie Mac;
Other versions of this item:
- E0 - Macroeconomics and Monetary Economics - - General
- N2 - Economic History - - Financial Markets and Institutions
- G01 - Financial Economics - - General - - - Financial Crises
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Augustin Landier & Kenichi Ueda, 2009. "The Economics of Bank Restructuring," IMF Staff Position Notes, International Monetary Fund 2009/12, International Monetary Fund.
- Larry Cordell & Karen Dynan & Andreas Lehnert & Nellie Liang & Eileen Mauskopf, 2008. "The incentives of mortgage servicers: myths and realities," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2008-46, Board of Governors of the Federal Reserve System (U.S.).
- John B. Taylor & John C. Williams, 2008.
"A Black Swan in the Money Market,"
NBER Working Papers
13943, National Bureau of Economic Research, Inc.
- John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, American Economic Association, vol. 1(1), pages 58-83, January.
- John B. Taylor & John C. Williams, 2009. "A black swan in the money market," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Jan.
- John B. Taylor & John C. Williams, 2008. "A black swan in the money market," Working Paper Series, Federal Reserve Bank of San Francisco 2008-04, Federal Reserve Bank of San Francisco.
- Markus K. Brunnermeier, 2008. "Deciphering the Liquidity and Credit Crunch 2007-08," NBER Working Papers 14612, National Bureau of Economic Research, Inc.
- Mark E Schweitzer & Guhan Venkatu, 2009. "Adjustable-rate mortgages and the Libor surprise," Economic Commentary, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Jan.
- Hancock, Diana & Passmore, Wayne, 2011. "Did the Federal Reserve's MBS purchase program lower mortgage rates?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 58(5), pages 498-514.
- Edward Simpson Prescott, 2010. "Introduction to the special issue on the Diamond-Dybvig model," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue 1Q, pages 1-9.
- Hoshi, Takeo & Kashyap, Anil K, 2010.
"Will the U.S. bank recapitalization succeed? Eight lessons from Japan,"
Journal of Financial Economics, Elsevier,
Elsevier, vol. 97(3), pages 398-417, September.
- Takeo Hoshi & Anil K Kashyap, 2008. "Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan," NBER Working Papers 14401, National Bureau of Economic Research, Inc.
- Pietro Veronesi & Luigi Zingales, 2009.
NBER Working Papers
15458, National Bureau of Economic Research, Inc.
- Veronesi, Pietro & Zingales, Luigi, 2009. "Paulson's Gift," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7528, C.E.P.R. Discussion Papers.
- Wilson, Linus, 2012. "Anchoring bias in the TARP warrant negotiations," Journal of Economics and Business, Elsevier, Elsevier, vol. 64(1), pages 63-76.
- Aït-Sahalia, Yacine & Andritzky, Jochen & Jobst, Andreas & Nowak, Sylwia & Tamirisa, Natalia, 2012.
"Market response to policy initiatives during the global financial crisis,"
Journal of International Economics, Elsevier,
Elsevier, vol. 87(1), pages 162-177.
- Yacine Aït-Sahalia & Jochen Andritzky & Andreas Jobst & Sylwia Nowak & Natalia Tamirisa, 2010. "Market Response to Policy Initiatives during the Global Financial Crisis," NBER Working Papers 15809, National Bureau of Economic Research, Inc.
- Chevallier, Julien, 2012.
"Global imbalances, cross-market linkages, and the financial crisis: A multivariate Markov-switching analysis,"
Economic Modelling, Elsevier,
Elsevier, vol. 29(3), pages 943-973.
- Chevallier, Julien, 2012. "Global imbalances, cross-market linkages, and the financial crisis : a multivariate Markov-Switching analysis," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/8773, Paris Dauphine University.
- Charles Bean, 2010. "Joseph Schumpeter Lecture The Great Moderation, The Great Panic, and The Great Contraction," Journal of the European Economic Association, MIT Press, MIT Press, vol. 8(2-3), pages 289-325, 04-05.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eric Encarnacion).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.