Is There a Link Between the American S&L Crisis of the 80s and the Subprime Crisis? An Analysis of Bank Returns
AbstractBetween 2000 and 2002, the American Federal Open Market Committee has strongly decreased its target rate. This decrease, associated with external economic factors as well as innovative financial practices has influenced investors’ behaviour. In this paper, we analyze the financial causes of the subprime crisis, in comparison with the American S&Ls crisis of the 1980s. We perform an event study on banks returns and show that only the monetary policy of the FED, i.e. interest rates, seems to have influenced, to some extent, these returns. Our analysis also stresses how securitization practices may explain one of the noticeable differences between the S&L crisis and the subprime crisis’ consequences while their origins seem to be similar.
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Bibliographic InfoArticle provided by CEPII research center in its journal International Economics/Economie Internationale.
Volume (Year): (2010)
Issue (Month): 122 ()
Subprimes; savings and loans; securitization; bank returns; credit risk;
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
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- Ureche-Rangau, Loredana & Burietz, Aurore, 2013. "One crisis, two crises…the subprime crisis and the European sovereign debt problems," Economic Modelling, Elsevier, vol. 35(C), pages 35-44.
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