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Lenders’ loose screening
- Anecdote and scholarly research both suggest that moral hazard in mortgage loan securitization (origination-and-distribution) process led to lenders’ loose screening, and thus was one of the major causes of the 2008 financial crisis.
www.tandfonline.com/doi/full/10.1080/20517483.2017.1427126
Oct 26, 2023 · Key Takeaways. The 2007-2008 financial crisis was caused by a confluence of many factors, including the Dotcom bubble burst, a low interest rate environment, financial products such as...
Feb 23, 2016 · The principle of “moral hazard” holds that government’s rescue of financial institutions encourages them to engage in risky transactions, because they anticipate being bailed out by the government.
- Edward J. Schoen
- schoen@rowan.edu
- 2017
The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. The crisis led to a severe economic recession, with millions losing their jobs and many businesses going bankrupt.
The following section discusses the problem of moral hazard in origination and analyses the flaws in mortgage securiti-zation that underlay the current crisis. Subsequently, Section 4 discusses the systemic repercus-sions that turned the subprime-mortgage crisis into a world financial crisis. 3.
May 13, 2015 · This has potentially significant moral hazard implications that may distort not only the behavior of investors and institutions but also possibly regulators who may feel compelled to adopt more intensive regulation to cope with the greater moral hazard.
- Anjan V. Thakor
- 2015
the devastating impact that the financial crisis had on many households. Unfortunately, the unemployment rate was not the only contributor affecting everyone's financial status; the stock market also took massive hits during this time. The general unease about the global mortgage and credit markets led to the stock market crash.
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Jun 6, 2020 · We examine these themes as well as asset pricing, moral hazard (though it was at the root of the crisis only in the Great Recession), the consequences for government as a systemic actor, economic concentration, and capital market regulation in the two crises.
