Introduction

The financial crisis hit the global economy unexpectedly from August 2007, producing consequences comparable to the ones experienced in the course of the 1930s. One of the its most serious characteristics, unlike previous financial crises in the 1990s and early 2000s, is that it originated in the very heart of the global economy, the US, to spread first and foremost to the most developed countries in Europe and Asia. The debate is still very open on what caused these events. It is, however, clear that the crisis, although originating from the US housing and mortgaging markets, found a very fertile terrain in the uncontrolled possibility of the financial markets to develop and sell new financial instruments that allowed the banking sector to expand enormously their capacity to extend loans and provide mortgages to the least solvent clients. Indeed, whether or not customers were able to repay their mortgages was of no interest to mortgage lenders which, in any case, were earning a commission for each mortgage deal sealed and therefore had a vested interest in multiplying the number of loans. Mortgage dealers could sell back to investment banks the home loans they had provided to their clients and they could mix them with other securities and resell them as ‘investment-grade’ mortgage-backed securities (MBS).1