Soft Information in the Subprime Mortgage Market

The main purpose of this article is to determine which factors and how contributed to the subprime mortgage crisis in the United States in 2007–2008, what their causal links and effects on the markets and the whole economy were, and to assess what actions could have been taken by the Federal Reserve and the Government in order to mitigate or prevent the consequences of subprime mortgage crisis and housing bubble. In order to obtain the research results, the authors performed a qualitative analysis of the scientific literature on the course of events and their development that led to the subprime mortgage crisis, and focused on the insufficiently regulated home mortgage market expansion, the impact on the subprime mortgage crisis of financial innovations and financial engineering, poorly evaluated systemic risks and policy undertaken by both the U.S. Government and the Federal Reserve before and after the crisis. The quantitative research focused on two main parts: firstly, analysis of the dependence between the causes of subprime mortgage crisis and the consequences, using a statistical and regression analysis, and secondly, an alternative path the Government and the Federal Reserve could have taken in their policy actions and the results they could have produced. The authors believe that the results of the research could give useful guidelines to the central bankers and government officials on how to make long-term decisions that can help in preparing for the financial distress, mitigating the consequences when the crisis strikes, accelerating the recovery and even preventing the crisis it in the future. The second part of the qualitative research will appear in the next issue of the journal.

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A Symposium on the Subprime Crisis

City and Community ◽

10.1111/j.1540-6040.2009.01292_1.x ◽

2009 ◽

Vol 8 (3) ◽

pp. 341-345 ◽

Cited By ~ 13

Author(s):

Dan Immergluck

Keyword(s):

The United States ◽

Mortgage Lending ◽

Mortgage Market ◽

Subprime Crisis ◽

Risk Capital ◽

Subprime Mortgage ◽

Financial Deregulation ◽

Community Reinvestment ◽

Vertical Disintegration ◽

Mortgage Crisis

The subprime crisis in mortgage lending and the resulting wave of foreclosures have been hitting cities and communities all over the United States. First, Dan Immergluck argues that there are three main elements in the financial crisis: (1) the vertical disintegration of the mortgage market and the related securitization; (2) financial deregulation; and (3) the burgeoning supply of high–risk capital. Second, Manuel Aalbers counters the view that the Community Reinvestment Act (CRA) and the associated community reinvestment movement can be blamed for the subprime mortgage crisis. He lists five reasons why the CRA is not guilty. Third and finally, Peter Marcuse sees the subprime crisis as a result of the underlying economic system. He argues that the private sector should not be viewed as the appropriate means of providing housing. He discusses a number of proposals that impact on the crisis and its roots.

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The Global Recession of 2007–2009: The Moral Factor and Jewish Law

The Oxford Handbook of Judaism and Economics ◽

10.1093/oxfordhb/9780195398625.013.0021 ◽

2010 ◽

pp. 403-428

Author(s):

Aaron Levine

Keyword(s):

United States ◽

The United States ◽

Mortgage Market ◽

Jewish Law ◽

Subprime Mortgage ◽

The Great Depression ◽

Global Recession ◽

United States Economy ◽

Moral Factor ◽

Home Mortgage

This article focuses on the recent global recession that raged the world and in particular the United States with special reference to Jewish law. In December 2007, the United States economy plunged into the longest and deepest downturn since the Great Depression. The driving force behind the recession was the widespread failure of the subprime mortgage market, the segment of the home mortgage market extending loans to households with impaired credit histories and with little or no documentation of income. The collapse of that sector occurred in a rapid succession of events beginning with the fall of Countrywide Financial in January 2008. This article further moves to explain the moral factor pervading the recession and analyses the situation as per Jewish law. The central relevant moral dictum of Jewish law is the Imitatio Dei principle, which says that, in our interpersonal conduct, we should emulate the various attributes of mercy.

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