Where were the regulators?

History 50.C2

1.      Textbook(s)

Blinder, Alan S., After the Music Stopped: The Financial Crisis, The Response, and The Work Ahead, The Penguin Press. (New York: 2013). ISBN: 978-0143124481. (This book is available in a Kindle Edition.)

 

• Readings: After the Music Stopped: p. 39-68 (focus most especially on 47-68).

 

This week we review how the failure of financial regulatory agencies and excessive, high-risk leverage, in the form of derivatives, set the stage for financial crisis. 

In this forum we will discuss some specifics related to the failure of regulators and leverage.

MINIMUM REQUIREMENTS:  The comments should be well organized and accurately depict concepts and events discussed in the textbook. 150-350 words minimum work

 

• Where were the regulators? In response to this question: 1) identify a bank regulator 2) explain one reason given the text concerning why bank regulators failed to reign in practices in subprime lending and the securitizing and leveraging of bad mortgages. (See pp. 58-59). Do not reproduce information already in the thread. If something has already been said, elaborate further, add another important piece of information. Or, move on to the other topic.
• Identify and define a derivative that played a role in the crisis, mortgage backed securities, credit default swaps, then explain why the abuse of these derivatives caused problems.
• What is leverage? Describe one example of how excessive leverage created enormous risks for Wall Street firms. This topic may end up being related to the second topic if one discusses leverage and the use of derivatives. Try to move the dialogue to a discussion of how abuse of leverage created system wide risks. Again, do not reproduce information already provided in the thread. Try to move the discussion along.