“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” - Chuck Prince

Readings

• Deciphering the Liquidity and Credit Crunch 2007-2008
• THE PANIC OF 2007
• Did Securitization Lead to Lax Screening? Evidence From Subprime Loans
• Risks and Realities of Mezzanine Loans
• The Past, Present, and Future of Subprime Mortgages
• Demyanyk & Van Hemert (2008)

Introduction

The GSE Act

How a Mortgage Becomes a Bond

Subprime Mortgages

The Economic Collapse

Federal Reserve

GSEs

• Past downturns in housing prices were primarily regional phenomena—the United States had not experienced a nationwide decline in housing prices in the period following World War II. (Source)