Lessons from the Subprime Meltdown
AbstractThis paper uses Hyman P. Minsky's approach to analyze the current international financial crisis, which was initiated by problems in the U.S. real estate market. In a 1987 manuscript, Minsky had already recognized the importance of the trend toward securitization of home mortgages. This paper identifies the causes and consequences of the financial innovations that created the real estate boom and bust. It examines the role played by each of the key players—including brokers, appraisers, borrowers, securitizers, insurers, and regulators—in creating the crisis. Finally, it proposes short-run solutions to the current crisis, as well as longer-run policy to prevent "it" (a debt deflation) from happening again.
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Bibliographic InfoPaper provided by Levy Economics Institute, The in its series Economics Working Paper Archive with number wp_522.
Date of creation: Dec 2007
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- NEP-ALL-2007-12-15 (All new papers)
- NEP-FMK-2007-12-15 (Financial Markets)
- NEP-HIS-2007-12-15 (Business, Economic & Financial History)
- NEP-PKE-2007-12-15 (Post Keynesian Economics)
- NEP-URE-2007-12-15 (Urban & Real Estate Economics)
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