SOSC 2340 Lecture Notes - Lecture 2: Subprime Lending, George W. Bush, Comparative Advantage
16 Aug 2019
School
Department
Course
Professor
Document Summary
Introduction: 2008 financial crisis was predictable and predicted, combination of the deregulated market that was liquid, low-interest rates, global real estate bubble, skyrocketing subprime lending, the crash: the housing bubble broke, prices fell and many homeowners found themselves. Usually, a good product would have low-interest rates, low transaction costs and protection in the event of houses losing value or borrowers losing their jobs. rates with no protection against high levels of risk and slight increase homeownership. Instead, the firms created a product with high transaction costs and variable interest. In this sense, finding who to blame, what happened and what caused the crisis is similar to peeling an onion. The problem has many layers and with each layer comes new questions that need to be answered. Market failures: when there are not enough regulations, people need to pay for the consequences of the fewer regulations and be aware of it.
