Question: When did the issuance of CDO peak?

Answer: Q1 2007

the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions. CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1


Question: What was the estimated value of CDO issuance in Q1 2004?

Answer: $20 billion

the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions. CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1


Question: What was the estimated value of CDO issuance at it's peak in Q1 2007?

Answer: over $180 billion

the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions. CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1


Question: What percent of CDO assets were subprime and other non-prime mortgage debt in 2007?

Answer: 36%

2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets. As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's


Question: What was the estimated value of CDO issuance in Q1 2008?

Answer: under $20 billion

the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions. CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1


Question: Which products created more complexity in the financial markets?

Answer: innovative financial products

his tenure at the World Bank, Rotberg was credited with opening up new capital markets throughout the world, establishing new ways of borrowing, developing worldwide capital markets, and creating innovative financial products in a score of different currencies. Many of these techniques and products were used in later years by both industrialized and developing countries to facilitate raising funds outside of their own borders for infrastructure, trade, and overall economic development. This permitted “globalization” of the world’s financial system, in which savings from one country were borrowed in the capital markets to facilitate economic growth in other countries. During his


Question: What effect did the introduction of innovative financial products have on a single mortgage?

Answer: multiplied the number of actors connected

became worthless. This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this


Question: What did institutions rely more on as increasing distance from underlying assets occurred?

Answer: indirect information

became worthless. This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this


Question: What is a type of indirect information that financial institutions and investors used to judge the risk?

Answer: computer models of rating agencies

became worthless. This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this


Question: In what year did a group of computer scientists build a model for ratings produced by rating agencies that turned out to be accurate for what happened in 2006-2008?

Answer: 2005

without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies. In their book on the crisis, journalists Bethany McLean, and Joe Nocera, criticized rating agencies for continuing "to slap their triple-A [ratings]s on subprime securities even as the underwriting deteriorated – and as the housing boom turned into an outright bubble" in 2005, 2006, and 2007. McLean and Nocera blamed the practice on "an erosion of standards, a willful suspension of skepticism,


Question: What is the incremental compensation required by investors for taking on addition risk called?

Answer: pricing of risk

historical trends of the past 50 years. Limitations of default and prepayment models, the heart of pricing models, led to overvaluation of mortgage and asset-backed products and their derivatives by originators, securitizers, broker-dealers, rating-agencies, insurance underwriters and the vast majority of investors (with the exception of certain hedge funds). While financial derivatives and structured products helped partition and shift risk between financial participants, it was the underestimation of falling housing prices and the resultant losses that led to aggregate risk. The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be


Question: According to several scholars, what prevented markets from correctly pricing risk before the crisis?

Answer: lack of transparency about banks' risk exposures

measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format. For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its effect on the overall stability of the financial system. For


Question: What was the outcome of the financial crisis since risk levels were not adequately disclosed?

Answer: far more disruptive

measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format. For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its effect on the overall stability of the financial system. For


Question: What did market participants fail to measure accurately?

Answer: risk inherent with financial innovation

measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format. For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its effect on the overall stability of the financial system. For


Question: How much did JPMorgan estimate was the average recovery rate for high quality CDOs that had been liquidated?

Answer: approximately 32 cents on the dollar

example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450 billion of CDO were sold between "late 2005 to the middle of 2007"; among the $102 billion of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar. Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS


Question: How much did JPMorgan estimate was the average recovery rate for mezzanine CDOs that had been liquidated?

Answer: approximately five cents for every dollar

example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450 billion of CDO were sold between "late 2005 to the middle of 2007"; among the $102 billion of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar. Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS


Question: How much did banks estimate was the value of CDOs sold between late 2005 to the middle of 2007?

Answer: $450bn

of the global banking system in serious peril...Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees." The pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. It has been estimated that the "from late 2005 to the middle of 2007, around $450bn of CDO of ABS were issued, of which about one third were created from risky mortgage-backed bonds...[o]ut of that pile, around $305bn of the CDOs are now in a formal state of default, with


Question: What firm insured obligations of various financial institutions using credit default swaps?

Answer: AIG

example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450 billion of CDO were sold between "late 2005 to the middle of 2007"; among the $102 billion of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar. Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS


Question: What does the abbreviation CDS stand for?

Answer: credit default swaps

5% of overall stock market capitalization. However, since they were primarily borne by levered financial institutions, spiral effects amplified the crisis so the stock market losses amounted to more than 8 trillion dollars. Credit default swaps (CDS) also played a significant role in the run up to the crisis. The buyer of a CDS is entitled to the principal of the bond in the case of default. A key characteristic of a CDS is that the buyer does not have to hold a bond in order to purchase a CDS. As a result, this financial instrument allowed pessimists to drive


Question: When did the government take over AIG?

Answer: September 2008

transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. US taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions. The Financial Crisis Inquiry Commission (FCIC) made the major government study of the crisis. It concluded


Question: How much money did taxpayers provide in government support to AIG during 2008 and early 2009?

Answer: over $180 billion

transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. US taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions. The Financial Crisis Inquiry Commission (FCIC) made the major government study of the crisis. It concluded


Question: What did AIG receive for promising to pay Party A in the event that Party B defaulted?

Answer: a premium

the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. U.S. taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions. Author Michael Lewis wrote that CDS enabled


Question: Who commented that the super-boom got out of hand when products became so complicated that risk could not be accurately calculated?

Answer: George Soros

rely on them, accepted as valid some complex mathematical models that theoretically showed the risks were much smaller than they turned out to be. George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility." Complex financing structures called structured investment vehicles (SIV) or conduits enabled banks to move significant amounts


Question: What happened to financial assets that made them harder to value?

Answer: more complex

financial markets began behaving in ways that users of Li's formula hadn't expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system's foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril... Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees." As financial assets became more complex, less transparent, and harder and harder to value, investors were reassured by the fact that both international bond rating agencies and bank regulators, who came to


Question: Who did rating agencies rely on for information to rate financial innovation products?

Answer: the originators of synthetic products

rely on them, accepted as valid some complex mathematical models that theoretically showed the risks were much smaller than they turned out to be. George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility." Complex financing structures called structured investment vehicles (SIV) or conduits enabled banks to move significant amounts


Question: When authorities could no longer calculate the risks of complex financial innovation products, who did they rely on for information?

Answer: the banks

rely on them, accepted as valid some complex mathematical models that theoretically showed the risks were much smaller than they turned out to be. George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility." Complex financing structures called structured investment vehicles (SIV) or conduits enabled banks to move significant amounts


Question: Who reassured investors by showing the risk of complex financial innovation products was actually less than they proved to be?

Answer: international bond rating agencies

not properly understood. This formula assumed that the price of CDS was correlated with and could predict the correct price of mortgage-backed securities. Because it was highly tractable, it rapidly came to be used by a huge percentage of CDO and CDS investors, issuers, and rating agencies. According to one wired.com article: As financial assets became more complex and harder to value, investors were reassured by the fact that the international bond rating agencies and bank regulators accepted as valid some complex mathematical models that showed the risks were much smaller than they actually were. George Soros commented that "The


Question: Who published "Credit Correlation: Life After Copulas" in 2007?

Answer: World Scientific

with subprime-based credit assets because the loss experience with early "vintages" of subprime loans was so low. Despite the dominance of the above formula, there are documented attempts of the financial industry, occurring before the crisis, to address the formula limitations, specifically the lack of dependence dynamics and the poor representation of extreme events. The volume "Credit Correlation: Life After Copulas", published in 2007 by World Scientific, summarizes a 2006 conference held by Merrill Lynch in London where several practitioners attempted to propose models rectifying some of the copula limitations. See also the article by Donnelly and Embrechts and the


Question: When did relevant warnings and research on CDOs appear in an article by Donnelly and Embrechts?

Answer: 2006

book by Brigo, Pallavicini and Torresetti, that reports relevant warnings and research on CDOs appeared in 2006. There is strong evidence that the riskiest, worst performing mortgages were funded through the "shadow banking system" and that competition from the shadow banking system may have pressured more traditional institutions to lower their own underwriting standards and originate riskier loans. In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a "run" on the entities in the


Question: What did the volume "Credit Correlation: Life After Copulas" propose models to rectify?

Answer: some of the copula limitations

with subprime-based credit assets because the loss experience with early "vintages" of subprime loans was so low. Despite the dominance of the above formula, there are documented attempts of the financial industry, occurring before the crisis, to address the formula limitations, specifically the lack of dependence dynamics and the poor representation of extreme events. The volume "Credit Correlation: Life After Copulas", published in 2007 by World Scientific, summarizes a 2006 conference held by Merrill Lynch in London where several practitioners attempted to propose models rectifying some of the copula limitations. See also the article by Donnelly and Embrechts and the


Question: What year did the book by Brigo, Pallavicini and Torresetti report warnings and research on CDOs?

Answer: 2006

book by Brigo, Pallavicini and Torresetti, that reports relevant warnings and research on CDOs appeared in 2006. There is strong evidence that the riskiest, worst performing mortgages were funded through the "shadow banking system" and that competition from the shadow banking system may have pressured more traditional institutions to lower their own underwriting standards and originate riskier loans. In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a "run" on the entities in the


Question: Who was President and CEO of the New York Federal Reserve Bank in June 2008?

Answer: Timothy Geithner

2015. Many "shadow bank"-like institutions and vehicles have emerged in American and European markets, between the years 2000 and 2008, and have come to play an important role in providing credit across the global financial system. In a June 2008 speech, Timothy Geithner, then President and CEO of the Federal Reserve Bank of New York, described the growing importance of what he called the "non-bank financial system": "In early 2007, asset-backed commercial paper conduits, in structured investment vehicles, in auction-rate preferred securities, tender option bonds and variable rate demand notes, had a combined asset size of roughly $2.2 trillion. Assets


Question: What year did Timothy Geithner become U.S. Treasury Secretary?

Answer: 2009

Timothy Geithner Timothy Franz "Tim" Geithner (; born August 18, 1961) is a former American central banker who served as the 75th United States Secretary of the Treasury under President Barack Obama, from 2009 to 2013. He was the President of the Federal Reserve Bank of New York from 2003 to 2009, following service in the Clinton administration. Since March 2014, he has served as president and managing director of Warburg Pincus, a private equity firm headquartered in New York City. As President of the New York Fed and Secretary of the Treasury, Geithner had a key role in government


Question: In a June 2008 speech, Timoty Geithner placed blame for credit market freezing on which system?

Answer: "parallel" banking system

banking system. Key components of the market – for example, the multitrillion-dollar repo lending market, off-balance-sheet entities, and the use of over-the-counter derivatives – were hidden from view, without the protections we had constructed to prevent financial meltdowns. We had a 21st-century financial system with 19th-century safeguards." In a June 2008 speech, President of the NY Federal Reserve Bank Timothy Geithner, who later became Secretary of the Treasury, placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the


Question: What is the "parallel" banking system also called?

Answer: shadow banking system

the Financial Crisis Inquiry Commission to benefit the Financial Industry. Critics have also raised questions about Wallison's methodology and use of data. Unregulated financial institutions called the shadow banking system play a critical role in the credit markets. In a June 2008 speech, U.S. Treasury Secretary Timothy Geithner, then President and CEO of the NY Federal Reserve Bank, placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. He described the significance of this unregulated banking system: "In early 2007, asset-backed commercial paper conduits,


Question: What is the term defined as being vulnerable by borrowing short-term in liquid markets to purchase long-term illiquid and risky assets?

Answer: maturity mismatch

"parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because of maturity mismatch, meaning that they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging, selling their long-term assets at depressed prices. He described the significance of these entities: Paul Krugman, laureate of the Nobel Prize in Economics, described the run on the shadow banking system as


Question: When did the securitization markets supported by the shadow banking systems start to close down?

Answer: spring of 2007

the "core of what happened" to cause the crisis. He referred to this lack of controls as "malign neglect" and argued that regulation should have been imposed on all banking-like activity. The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a


Question: When did the securitization markets supported by the shadow banking system nearly shut-down completely?

Answer: fall of 2008

the "core of what happened" to cause the crisis. He referred to this lack of controls as "malign neglect" and argued that regulation should have been imposed on all banking-like activity. The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a


Question: What is the firm who reported that the traditional banking system does not have capital to close the gap as of June 2009?

Answer: Brookings Institution

the "core of what happened" to cause the crisis. He referred to this lack of controls as "malign neglect" and argued that regulation should have been imposed on all banking-like activity. The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a


Question: How many years would of strong profit would it take to generate enough capital to support additional lending?

Answer: a number of years

as described above. Without the ability to obtain investor funds in exchange for most types of mortgage-backed securities or asset-backed commercial paper, investment banks and other entities in the shadow banking system could not provide funds to mortgage firms and other corporations. This meant that nearly one-third of the US lending mechanism was frozen and continued to be frozen into June 2009. According to the Brookings Institution, at that time the traditional banking system did not have the capital to close this gap: "It would take a number of years of strong profits to generate sufficient capital to support that


Question: What economist testified to the Financial Crisis Inquiry Commission in January 2010?

Answer: Mark Zandi

financial firms "running" on other financial firms by not renewing sale and repurchase agreements (repo) or increasing the repo margin ("haircut"), forcing massive deleveraging, and resulting in the banking system being insolvent. Fed Chair Ben Bernanke stated in an interview with the FCIC during 2009 that 12 of the 13 largest U.S. financial institutions were at risk of failure during 2008. The FCIC report did not identify which of the 13 firms was not considered by Bernanke to be in danger of failure. Economist Mark Zandi testified to the Financial Crisis Inquiry Commission in January 2010: The securitization markets also


Question: In January 2010, what markets did Mark Zandi testify about that remain impaired and investors anticipate more loan losses?

Answer: securitization markets

financial firms "running" on other financial firms by not renewing sale and repurchase agreements (repo) or increasing the repo margin ("haircut"), forcing massive deleveraging, and resulting in the banking system being insolvent. Fed Chair Ben Bernanke stated in an interview with the FCIC during 2009 that 12 of the 13 largest U.S. financial institutions were at risk of failure during 2008. The FCIC report did not identify which of the 13 firms was not considered by Bernanke to be in danger of failure. Economist Mark Zandi testified to the Financial Crisis Inquiry Commission in January 2010: The securitization markets also


Question: What was the value of CDOs at their peak in 2006?

Answer: close to $2 trillion

remain impaired, as investors anticipate more loan losses. Investors are also uncertain about coming legal and accounting rule changes and regulatory reforms. Private bond issuance of residential and commercial mortgage-backed securities, asset-backed securities, and CDOs peaked in 2006 at close to $2 trillion...In 2009, private issuance was less than $150 billion, and almost all of it was asset-backed issuance supported by the Federal Reserve's TALF program to aid credit card, auto and small-business lenders. Issuance of residential and commercial mortgage-backed securities and CDOs remains dormant. "The Economist" reported in March 2010: "Bear Stearns and Lehman Brothers were non-banks that were


Question: What was the private issuance of CDOs in 2009?

Answer: less than $150 billion

remain impaired, as investors anticipate more loan losses. Investors are also uncertain about coming legal and accounting rule changes and regulatory reforms. Private bond issuance of residential and commercial mortgage-backed securities, asset-backed securities, and CDOs peaked in 2006 at close to $2 trillion...In 2009, private issuance was less than $150 billion, and almost all of it was asset-backed issuance supported by the Federal Reserve's TALF program to aid credit card, auto and small-business lenders. Issuance of residential and commercial mortgage-backed securities and CDOs remains dormant. "The Economist" reported in March 2010: "Bear Stearns and Lehman Brothers were non-banks that were


Question: Following the collapse in the housing bubble, what happened to a number of commodity prices?

Answer: Rapid increases

number of years of strong profits to generate sufficient capital to support that additional lending volume." The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions." Rapid increases in a number of commodity prices followed the collapse in the housing bubble. The price of oil nearly tripled from $50 to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008. Experts debate the causes, with some attributing it to speculative flow of money from housing and other investments


Question: What did the price of oil began doing when the financial crisis began to take hold in late 2008?

Answer: plunging

oil prices given the onset of the global recession. The recession caused demand for energy to shrink in late 2008, with oil prices falling from the July 2008 high of $147 to a December 2008 low of $32. Oil prices stabilized by October 2009 and established a trading range between $60 and $80. The price of oil nearly tripled from $50 to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008. Experts debate the causes, which include the flow of money from housing and other investments into commodities to speculation


Question: What is one of the reasons experts believe contributed to the volatilaty in oil prices in 2008?

Answer: monetary policy

that led to "America’s contemporary economic malaise." A commodity price bubble was created following the collapse in the housing bubble. The price of oil nearly tripled from $50 to $140 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008. Experts debate the causes, which include the flow of money from housing and other investments into commodities to speculation and monetary policy. An increase in oil prices tends to divert a larger share of consumer spending into gasoline, which creates downward pressure on economic growth in oil importing countries, as wealth flows


Question: Who was the former director of the CFTC that testified before the Senate Committee on Commerce, Science, and Transportation on June 3, 2008?

Answer: Michael Greenberger

and a gallon of gasoline was more than $4 across most of the US. The high of 2008 may have been part of broader pattern of spiking instability in the price of oil over the preceding decade. This pattern of instability in oil price may be a product of peak oil. There is concern that if the economy was to improve, oil prices might return to pre-recession levels. In testimony before the Senate Committee on Commerce, Science, and Transportation on 3 June 2008, former director of the CFTC Division of Trading & Markets (responsible for enforcement) Michael Greenberger specifically named


Question: Who did Michael Greenberger erronesously name as a key player in speculative run-up of oil futures?

Answer: IntercontinentalExchange

the Atlanta-based IntercontinentalExchange, founded by Goldman Sachs, Morgan Stanley and British Petroleum as playing a key role in the speculative run-up of oil futures prices traded off the regulated futures exchanges in London and New York. The price of oil rose to $77 per barrel on 24 June as a cyclone begins to form in the south western Caribbean. The price for July 2010 was about $84–$90 per barrel of crude oil. Oil prices ended the year at $101.80, falling to $100.01 per barrel on 30 and 31 January 2011., then the Egyptian civil war broke out, as it theoretically


Question: Feminist economists Ailsa McKay and Margunn Bjornhold believe that the financial crisis and response reveal a crisis of ideas in this?

Answer: mainstream economics

experimental learning, laboratory sessions, individual research and more chances to "do economics." Some want more dialogue between instructors and students. Many feminist economists are urgently interested in how course content influences the demographic composition of future economists, suggesting that the "classroom climate" affects some students' perceptions of their own ability. Margunn Bjørnholt and Ailsa McKay argue that the financial crisis of 2007–08 and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession. They argue that such a


Question: According to feminist economists McKay and Bjornholt, would type economics should be included in a reshaping?

Answer: feminist economics

reshaping should include new advances within feminist economics that take as their starting point the socially responsible, sensible and accountable subject in creating an economy and economic theories that fully acknowledge care for each other as well as the planet. Feminist critiques of economics include that "economics, like any science, is socially constructed." Feminist economists show that social constructs act to privilege male-identified, western, and heterosexual interpretations of economics. They generally incorporate feminist theory and frameworks to show how traditional economics communities signal expectations regarding appropriate participants, to the exclusion of outsiders. Such criticisms extend to the theories, methodologies and


Question: What do economists McKay and Bjornholt want to occur in the economy, economic theory, and economics profession?

Answer: a reshaping

experimental learning, laboratory sessions, individual research and more chances to "do economics." Some want more dialogue between instructors and students. Many feminist economists are urgently interested in how course content influences the demographic composition of future economists, suggesting that the "classroom climate" affects some students' perceptions of their own ability. Margunn Bjørnholt and Ailsa McKay argue that the financial crisis of 2007–08 and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession. They argue that such a


Question: Who was the current Governor of the Reserve Bank of India that predicted the crisis in 2005?

Answer: Raghuram Rajan

would cause the housing bubble to burst, leading to financial collapse. Schiff regularly appeared on television in the years before the crisis and warned of the impending real estate collapse. Karim Abadir, based on his work with Gabriel Talmain, predicted the timing of the recession whose trigger had already started manifesting itself in the real economy from early 2007. The former Governor of the Reserve Bank of India, Raghuram Rajan, had predicted the crisis in 2005 when he became chief economist at the International Monetary Fund. In 2005, at a celebration honoring Alan Greenspan, who was about to retire as


Question: When did Raghuram Rajan become chief economist the the International Monetary Fund?

Answer: 2005

Popescu-Tăriceanu claimed that "Since 2005, IMF is constantly making mistakes when it appreciates the country's economic performances". Former Tanzanian President Julius Nyerere, who claimed that debt-ridden African states were ceding sovereignty to the IMF and the World Bank, famously asked, "Who elected the IMF to be the ministry of finance for every country in the world?" Former chief economist of IMF and former Reserve Bank of India (RBI) Governor Raghuram Rajan who predicted Financial crisis of 2007–08 criticised IMF for remaining a sideline player to the Developed world. He criticised IMF for praising the monetary policies of the US, which


Question: What was the name of Raghuram Rajan's controversial paper delivered in 2005?

Answer: "Has Financial Development Made the World Riskier?"

in spreading opportunity and fighting poverty. …Without vibrant, innovative financial markets, economies would ossify and decline." (p 1) In 2005, at a celebration honouring [[Alan Greenspan]], who was about to retire as chairman of the [[US Federal Reserve]], Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom." Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known


Question: What are risks called that generate severe adverse consequences with small probability but generous compensation the rest of the time?

Answer: tail risks

chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, Rajan "argued that disaster might loom." Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialize, financial positions can be unwound and losses allocated so that


Question: Who was one of the only mainstream economist to predict the financial crisis?

Answer: Raghuram Rajan

would cause the housing bubble to burst, leading to financial collapse. Schiff regularly appeared on television in the years before the crisis and warned of the impending real estate collapse. Karim Abadir, based on his work with Gabriel Talmain, predicted the timing of the recession whose trigger had already started manifesting itself in the real economy from early 2007. The former Governor of the Reserve Bank of India, Raghuram Rajan, had predicted the crisis in 2005 when he became chief economist at the International Monetary Fund. In 2005, at a celebration honoring Alan Greenspan, who was about to retire as


Question: Who credit 12 heterodox economists with predicting the crisis in his research credits?

Answer: Dirk Bezemer

economics, most believe that financial crises are simply unpredictable, following Eugene Fama's efficient-market hypothesis and the related random-walk hypothesis, which state respectively that markets contain all information about possible future movements, and that the movements of financial prices are random and unpredictable. Recent research casts doubt on the accuracy of "early warning" systems of potential crises, which must also predict their timing. The Austrian economic school regarded the crisis as a vindication and classic example of a predictable credit-fueled bubble caused by laxity in monetary supply. A number of heterodox economists predicted the crisis, with varying arguments. Dirk Bezemer in


Question: How did the Austrian economic school regard the crisis?

Answer: as a vindication

economics, most believe that financial crises are simply unpredictable, following Eugene Fama's efficient-market hypothesis and the related random-walk hypothesis, which state respectively that markets contain all information about possible future movements, and that the movements of financial prices are random and unpredictable. Recent research casts doubt on the accuracy of "early warning" systems of potential crises, which must also predict their timing. The Austrian economic school regarded the crisis as a vindication and classic example of a predictable credit-fueled bubble caused by laxity in monetary supply. A number of heterodox economists predicted the crisis, with varying arguments. Dirk Bezemer in


Question: Which former Fed Chair confessed in Congressional testimony to being forced to return to lax monetary supply?

Answer: Alan Greenspan

based on a constant growth in the money supply. This approach was refined to include different classes of money and credit (M0, M1 etc.). In the US this approach to monetary policy was discontinued with the selection of Alan Greenspan as Fed Chairman. This approach is also sometimes called monetarism. Central banks might choose to set a money supply growth target as a nominal anchor to keep prices stable in the long term. The quantity theory, is a long run model, which links price levels to money supply and demand. Using this equation, we can rearrange to see the following:


Question: Which magazine ran a cover story claiming that most economists failed to the the financial crisis?

Answer: BusinessWeek

Economists Ailsa McKay and Margunn Bjørnholt argue that the financial crisis and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession. The financial crisis was not widely predicted by mainstream economists. A cover story in "BusinessWeek" magazine claims that economists mostly failed to predict the worst international economic crisis since the Great Depression of the 1930s. The Wharton School of the University of Pennsylvania's online business journal examines why economists failed to predict a major global financial


Question: The financial crisis of 2007 was the worst economic crisis since which crisis that occurred in the 1930s?

Answer: Great Depression

Economists Ailsa McKay and Margunn Bjørnholt argue that the financial crisis and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession. The financial crisis was not widely predicted by mainstream economists. A cover story in "BusinessWeek" magazine claims that economists mostly failed to predict the worst international economic crisis since the Great Depression of the 1930s. The Wharton School of the University of Pennsylvania's online business journal examines why economists failed to predict a major global financial


Question: Which school at University of Pennsylvania examined in their online business journal why economists failed to predict the crisis?

Answer: The Wharton School

to oil-producing states. Spiking instability in the price of oil over the decade leading up to the price high of 2008 has also been proposed as a causal factor in the financial crisis. A cover story in "BusinessWeek" magazine claims that economists mostly failed to predict the worst international economic crisis since the Great Depression of the 1930s. The Wharton School of the University of Pennsylvania online business journal examines why economists failed to predict a major global financial crisis. An article in the New York Times informs that economist Nouriel Roubini warned of such crisis as early as September


Question: Which economist did the New York Times state warned of a crisis as early as September 2006?

Answer: Nouriel Roubini

crisis. Popular articles published in the mass media have led the general public to believe that the majority of economists have failed in their obligation to predict the financial crisis. For example, an article in the New York Times informs that economist Nouriel Roubini warned of such crisis as early as September 2006, and the article goes on to state that the profession of economics is bad at predicting recessions. According to "The Guardian", Roubini was ridiculed for predicting a collapse of the housing market and worldwide recession, while "The New York Times" labelled him "Dr. Doom". Within mainstream financial


Question: What was economist Roubini called by the New York Times for predicting a collapse of the housing market?

Answer: "Dr. Doom"

crisis. Popular articles published in the mass media have led the general public to believe that the majority of economists have failed in their obligation to predict the financial crisis. For example, an article in the New York Times informs that economist Nouriel Roubini warned of such crisis as early as September 2006, and the article goes on to state that the profession of economics is bad at predicting recessions. According to "The Guardian", Roubini was ridiculed for predicting a collapse of the housing market and worldwide recession, while "The New York Times" labelled him "Dr. Doom". Within mainstream financial


Question: What did Nassim Nicholas Taleb warn about for years prior to the financial crisis of 2007?

Answer: the breakdown of the banking system

the consequences to the real economy are minimized." Stock trader and financial risk engineer Nassim Nicholas Taleb, author of the 2007 book "The Black Swan", spent years warning against the breakdown of the banking system in particular and the economy in general owing to their use of and reliance on bad risk models and reliance on forecasting, and framed the problem as part of "robustness and fragility". He also took action against the establishment view by making a big financial bet on banking stocks and making a fortune from the crisis ("They didn't listen, so I took their money"). According


Question: What did Nassim Nicholas Taleb make a fortune on by making a big financial bet?

Answer: banking stocks

the consequences to the real economy are minimized." Stock trader and financial risk engineer Nassim Nicholas Taleb, author of the 2007 book "The Black Swan", spent years warning against the breakdown of the banking system in particular and the economy in general owing to their use of and reliance on bad risk models and reliance on forecasting, and framed the problem as part of "robustness and fragility". He also took action against the establishment view by making a big financial bet on banking stocks and making a fortune from the crisis ("They didn't listen, so I took their money"). According


Question: Who is the market strategist that believes distinctions exist between the current crisis and the Great Depression?

Answer: Phil Dow

increased their lending to small- and medium sized businesses while overall lending to those businesses decreased. The US stock market peaked in October 2007, when the Dow Jones Industrial Average index exceeded 14,000 points. It then entered a pronounced decline, which accelerated markedly in October 2008. By March 2009, the Dow Jones average had reached a trough of around 6,600. Four years later, it hit an all-time high. It is probable, but debated, that the Federal Reserve's aggressive policy of quantitative easing spurred the partial recovery in the stock market. Market strategist Phil Dow believes distinctions exist "between the current


Question: How much did the Dow Jones average fall during a period of 17 months?

Answer: 50%

market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow. Floyd Norris, the chief financial correspondent of "The New York Times", wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the


Question: What was the percentage the Dow Jones fell in the Great Depression?

Answer: 54.7%

market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow. Floyd Norris, the chief financial correspondent of "The New York Times", wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the


Question: Who was the chief financial correspondent of The New York Times in March 2009?

Answer: Floyd Norris

market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow. Floyd Norris, the chief financial correspondent of "The New York Times", wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the


Question: Which medium sized British bank was the first victim of the financial crisis?

Answer: Northern Rock

The International Monetary Fund estimated that large US and European banks lost more than $1 trillion on toxic assets and from bad loans from January 2007 to September 2009. These losses are expected to top $2.8 trillion from 2007 to 2010. US bank losses were forecast to hit $1 trillion and European bank losses will reach $1.6 trillion. The International Monetary Fund (IMF) estimated in 2009 that US banks were about 60% through their losses, but British and eurozone banks only 40%. One of the first victims was Northern Rock, a medium-sized British bank. The highly leveraged nature of its


Question: When did Northern Rock investors panic and a bank run begin?

Answer: September 2007

September 2007, the bank sought and received a liquidity support facility from the Bank of England, to replace funds it was unable to raise from the money market. This led to panic among individual depositors, who feared that their savings might not be available should Northern Rock go into receivership. The result was a bank run – the UK's first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since everyone else was doing the same. On 22 February 2008, the bank was taken into state ownership


Question: When was Northern Rock taken into public hands?

Answer: February 2008

2007, the mortgage bank Northern Rock suffered a liquidity crisis that required the bank to be rescued with a £27 billion loan from the Government. In February 2008, Northern Rock was taken into public ownership, and Ron Sandler was appointed by the Government to become Executive Chairman. This appointment was not entirely without controversy, given Sandler's £90,000 a month salary and his non-domicile status. He oversaw the turnaround of Northern Rock, which included the creation of an asset run-off (the"bad bank"), and a return of the bank to the private sector through the sale to Richard Branson's Virgin Money at


Question: Which bank early problems in 2007 were an indicator of the troubles that would soon befall other banks and financial institutions?

Answer: Northern Rock

business led the bank to request security from the Bank of England. This in turn led to investor panic and a bank run in mid-September 2007. Calls by Liberal Democrat Treasury Spokesman Vince Cable to nationalise the institution were initially ignored; in February 2008, however, the British government (having failed to find a private sector buyer) relented, and the bank was taken into public hands. Northern Rock's problems proved to be an early indication of the troubles that would soon befall other banks and financial institutions. The first visible institution to run into trouble in the United States was the


Question: IndyMac often made loans without verifying what?

Answer: the borrower’s income

deposits, led to its demise when the mortgage market declined in 2007. IndyMac often made loans without verification of the borrower’s income or assets, and to borrowers with poor credit histories. Appraisals obtained by IndyMac on underlying collateral were often questionable as well. As an Alt-A lender, IndyMac’s business model was to offer loan products to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans, and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments. The thrift remained profitable only as long


Question: IndyMac gave loans to borrower's with what type credit histories?

Answer: poor

deposits, led to its demise when the mortgage market declined in 2007. IndyMac often made loans without verification of the borrower’s income or assets, and to borrowers with poor credit histories. Appraisals obtained by IndyMac on underlying collateral were often questionable as well. As an Alt-A lender, IndyMac’s business model was to offer loan products to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans, and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments. The thrift remained profitable only as long


Question: IndyMac offered this type of questionable loans to borrowers?

Answer: risky

deposits, led to its demise when the mortgage market declined in 2007. IndyMac often made loans without verification of the borrower’s income or assets, and to borrowers with poor credit histories. Appraisals obtained by IndyMac on underlying collateral were often questionable as well. As an Alt-A lender, IndyMac’s business model was to offer loan products to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans, and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments. The thrift remained profitable only as long


Question: IndyMac resisted efforts by regulators to tighten this criteria of their loans?

Answer: issuing criteria

as it was able to sell those loans in the secondary mortgage market. IndyMac resisted efforts to regulate its involvement in those loans or tighten their issuing criteria: see the comment by Ruthann Melbourne, Chief Risk Officer, to the regulating agencies. May 12, 2008, in a small note in the "Capital" section of its what would become its last 10-Q released before receivership, IndyMac revealed - but did not admit - that it was no longer a well-capitalized institution and that it was headed for insolvency. IndyMac reported that during April 2008, Moody's and Standard & Poor's downgraded the ratings


Question: How many of the poorest families did not have any wealth decline during the financial crisis?

Answer: half

level since the government began collecting the data in 1964. With the decline of gross domestic product came the decline in innovation. With fewer resources to risk in creative destruction, the number of patent applications flat-lined. Compared to the previous 5 years of exponential increases in patent application, this stagnation correlates to the similar drop in GDP during the same time period. Typical American families did not fare as well, nor did those "wealthy-but-not wealthiest" families just beneath the pyramid's top. On the other hand, half of the poorest families did not have wealth declines at all during the crisis.


Question: In a Federal Reserve survey of 4,000 households, what percent reported wealth decline between 2007 and 2009?

Answer: 63

The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63 percent of all Americans declined in that period. 77 percent of the richest families had a decrease in total wealth, while only 50 percent of those on the bottom of the pyramid suffered a decrease. A 2015 study commissioned by the ACLU found that white home-owning households recovered from the financial crisis faster than black home-owning households, and projected that the financial crisis will likely widen the racial wealth gap in the US. The US Federal Reserve Open Market Committee release in


Question: How many of the richest families had a decrease in total wealth between 2007 and 2009?

Answer: 77

The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63 percent of all Americans declined in that period. 77 percent of the richest families had a decrease in total wealth, while only 50 percent of those on the bottom of the pyramid suffered a decrease. A 2015 study commissioned by the ACLU found that white home-owning households recovered from the financial crisis faster than black home-owning households, and projected that the financial crisis will likely widen the racial wealth gap in the US. The US Federal Reserve Open Market Committee release in


Question: How many families at the bottom of the pyramid had a decrease in total wealth between 2007 and 2009?

Answer: 50

The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63 percent of all Americans declined in that period. 77 percent of the richest families had a decrease in total wealth, while only 50 percent of those on the bottom of the pyramid suffered a decrease. A 2015 study commissioned by the ACLU found that white home-owning households recovered from the financial crisis faster than black home-owning households, and projected that the financial crisis will likely widen the racial wealth gap in the US. The US Federal Reserve Open Market Committee release in


Question: Which families experienced the least decline in wealth between 2007 and 2009?

Answer: poorest families

level since the government began collecting the data in 1964. With the decline of gross domestic product came the decline in innovation. With fewer resources to risk in creative destruction, the number of patent applications flat-lined. Compared to the previous 5 years of exponential increases in patent application, this stagnation correlates to the similar drop in GDP during the same time period. Typical American families did not fare as well, nor did those "wealthy-but-not wealthiest" families just beneath the pyramid's top. On the other hand, half of the poorest families did not have wealth declines at all during the crisis.


Question: How much did the European Commission estimate the GDP growth for Eurozone countries would be in 2009?

Answer: 0.1%

years. The recession in the Eurozone economy deepens with a fall of 0.6% in GDP in the fourth quarter of 2012. Of the major economies, Germany shrinks by 0.6%, France by 0.3% and Italy by 0.9%. The economy of the 27 members of the EU, including non-Eurozone members such as Denmark and the UK, shrinks by 0.5%. Japan remains in recession as the economy shrinks by a further 0.1%. The European Commission forecast for 2013 expects growth of 0.1% across the 27 members of the EU but a contraction of 0.3% in the Eurozone economy. In its National Economic Report


Question: On November 6, in Washington, D.C., who predicted a worldwide recession for 2009?

Answer: the IMF

kept growth ticking over throughout the worst of the global conditions. In fact, sources such as the IMF and the Reserve Bank of Australia had predicted Australia was well positioned to weather the crisis with minimal disruption, sustaining more than 2% GDP growth in 2009 (as many Western nations went into recession). In the same year, the World Economic Forum ranked Australia's banking system the fourth best in the world, while the Australian dollar's 30% drop was seen as a boon for trade, shielding the country from the crisis and helping to slow growth and consumption. Australia's recession affected New


Question: On November 5, 2008, the Bank of England reduced their interest rate from 4.5% to what?

Answer: 3%

jobs lost each month since the beginning of 2008. It is anticipated by experts that unemployment will rise to 8% by the middle of 2009. In the UK car sales fell by 23% in October, following a 21% decline in September. Amid predictions of a "deep recession" in the UK and the Eurozone, on Thursday, November 6, the Bank of England, citing a reduced danger of inflation due to falling commodities prices, lowered its base rate by 1.5 percentage points, from 4.5% to 3%. This was accompanied by a 50 basis point drop in the base rate to 3.25% by


Question: What have central banks around the world done to avoid the risk of a deflationary spiral?

Answer: expand money supplies

June 2009 stated: The US Federal Reserve and central banks around the world took steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment led to a self-reinforcing decline in global consumption. In addition, governments enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The US Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with


Question: What have governments done to offset the reduction in private sector demand?

Answer: enacted large fiscal stimulus packages

June 2009 stated: The US Federal Reserve and central banks around the world took steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment led to a self-reinforcing decline in global consumption. In addition, governments enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The US Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with


Question: What is the U.S. Federal Reserve's traditional role during a crisis?

Answer: lender-of-last-resort

June 2009 stated: The US Federal Reserve and central banks around the world took steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment led to a self-reinforcing decline in global consumption. In addition, governments enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The US Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with


Question: What type decline does lower wages and higher unemployment lead to?

Answer: self-reinforcing decline

June 2009 stated: The US Federal Reserve and central banks around the world took steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment led to a self-reinforcing decline in global consumption. In addition, governments enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The US Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with


Question: What brought the global financial system to the brink of collapse?

Answer: credit freeze

would guarantee these funds up to a point. The money market had been a key source of credit for banks (CDs) and nonfinancial firms (commercial paper). The TED spread (see graph above), a measure of the risk of interbank lending, quadrupled shortly after the Lehman failure. This credit freeze brought the global financial system to the brink of collapse. In a dramatic meeting on September 18, 2008, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke met with key legislators to propose a $700 billion emergency bailout of the banking system. Bernanke reportedly told them: "If we don't do this,


Question: How much government debt and troubled private assets did central banks purchase during the last quarter of 2008?

Answer: US$2.5 trillion

access to liquidity, and increasing the flexibility with which institutions could tap such liquidity. This credit freeze brought the global financial system to the brink of collapse. The response of the Federal Reserve, the European Central Bank, the Bank of England and other central banks was immediate and dramatic. During the last quarter of 2008, these central banks purchased US$2.5 trillion of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action, in world history. Following a model initiated by the United Kingdom bank rescue package,


Question: How much preferred stock did governments of European nations and the USA purchase in their major banks?

Answer: $1.5 trillion

the governments of European nations and the US guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $1.5 trillion newly issued preferred stock in their major banks. In October 2010, Nobel laureate Joseph Stiglitz explained how the US Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap. By creating $600 billion and inserting this directly into banks, the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas


Question: In October 2010, who was the Nobel laureate that explained how the U.S. Federal Reserve was creating currency to combat the liquidity trap?

Answer: Joseph Stiglitz

the governments of European nations and the US guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $1.5 trillion newly issued preferred stock in their major banks. In October 2010, Nobel laureate Joseph Stiglitz explained how the US Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap. By creating $600 billion and inserting this directly into banks, the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas


Question: What was introduced by President Barack Obama in June 2009?

Answer: a series of regulatory proposals

The US executed two stimulus packages, totaling nearly $1 trillion during 2008 and 2009. Other countries also implemented fiscal stimulus plans beginning in 2008. United States President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind-down systemically important institutions, among others. In January 2010, Obama proposed additional regulations limiting the ability of banks to engage in proprietary trading. The proposals were dubbed "The


Question: What was one of the items important to consumers that was addressed by the new regulatory proposals introduced in June 2009?

Answer: consumer protection

until it expired at 11:59PM EDT on October 8. The action was based on the view that short selling in a crisis market undermines confidence in financial institutions and erodes their stability. President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind-down systemically important institutions, among others. Legislation has cleared the house and is progressing in the senate. A variety of regulatory changes


Question: Regulations were proposed by Obama in January 2010 to limit the ability of banks to engage in which type trading?

Answer: proprietary

The US executed two stimulus packages, totaling nearly $1 trillion during 2008 and 2009. Other countries also implemented fiscal stimulus plans beginning in 2008. United States President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind-down systemically important institutions, among others. In January 2010, Obama proposed additional regulations limiting the ability of banks to engage in proprietary trading. The proposals were dubbed "The


Question: Who were proposed new regulations called "The Volcker Rule" named after?

Answer: Paul Volcker

Volcker Rule", in recognition of Paul Volcker, who has publicly argued for the proposed changes. The US Senate passed a reform bill in May 2010, following the House, which passed a bill in December 2009. These bills must now be reconciled. The "New York Times" provided a comparative summary of the features of the two bills, which address to varying extent the principles enumerated by the Obama administration. For instance, the Volcker Rule against proprietary trading is not part of the legislation, though in the Senate bill regulators have the discretion but not the obligation to prohibit these trades. European


Question: Who publicly argued for changes limiting the ability of banks to engage in proprietary trading?

Answer: Paul Volcker

Volcker Rule", in recognition of Paul Volcker, who has publicly argued for the proposed changes. The US Senate passed a reform bill in May 2010, following the House, which passed a bill in December 2009. These bills must now be reconciled. The "New York Times" provided a comparative summary of the features of the two bills, which address to varying extent the principles enumerated by the Obama administration. For instance, the Volcker Rule against proprietary trading is not part of the legislation, though in the Senate bill regulators have the discretion but not the obligation to prohibit these trades. European


Question: When did the U.S. Senate first pass a financial reform bill?

Answer: May 2010

court. It passed the Senate in November 2010, 68 to 30, in a roll-call vote. In May 2010, Franken proposed a financial-reform amendment that created a board to select which credit rating agency would evaluate a given security. At the time, any company issuing a security could select the company that evaluated the security. The amendment was passed, but the financial industry lobbied to have it removed from the final bill. Negotiations between the Senate and House, whose version of financial reform did not include such a provision, resulted in the amendment's being watered down to require only a series


Question: Which bill gave regulators the discretion to prohibit proprietary trades?

Answer: Senate

Volcker Rule", in recognition of Paul Volcker, who has publicly argued for the proposed changes. The US Senate passed a reform bill in May 2010, following the House, which passed a bill in December 2009. These bills must now be reconciled. The "New York Times" provided a comparative summary of the features of the two bills, which address to varying extent the principles enumerated by the Obama administration. For instance, the Volcker Rule against proprietary trading is not part of the legislation, though in the Senate bill regulators have the discretion but not the obligation to prohibit these trades. European


Question: What action in 2007 by national governments prevented the collapse of large financial institutions?

Answer: bailout of banks

Lynch, AIG, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo Real Estate, and Alliance & Leicester were all expected to follow—with a US federal bailout announced the following day beginning with $85 billion to AIG. In spite of trillions paid out by the US federal government, it became much more difficult to borrow money. The resulting decrease in buyers caused housing prices to plummet. While the collapse of large financial institutions was prevented by the bailout of banks by national governments, stock markets still dropped worldwide. In many areas, the housing market also suffered, resulting in evictions, foreclosures,


Question: What is the date the active phase of the financial crisis began as a liquidity crisis?

Answer: August 9, 2007

and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the Great Recession of 2008–2012 and contributing to the European sovereign-debt crisis. The active phase of the crisis, which manifested as a liquidity crisis, can be dated from August 9, 2007, when BNP Paribas terminated withdrawals from three hedge funds citing "a complete evaporation of liquidity". The bursting of the US housing bubble, which peaked at the end of 2006, caused the values of securities tied to


Question: What year did the global recession that followed the financial crisis of 2007 end?

Answer: 2012

major economies of the next generation along with BRIC and Indonesia. South Korea was one of the few developed countries that was able to avoid a recession during the global financial crisis, and its economic growth rate reached 6.2% in 2010, a sharp recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009 when the global financial crisis hit. The South Korean economy again recovered with the record-surplus of US$70.7 billion mark of the current account in the end of 2013, up 47 percent growth from 2012, amid uncertainties of the global economic turmoil, with major economic


Question: What was the name of the company that terminated withdrawals from three hedge funds in 2007 citing a liquidity crisis?

Answer: BNP Paribas

and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the Great Recession of 2008–2012 and contributing to the European sovereign-debt crisis. The active phase of the crisis, which manifested as a liquidity crisis, can be dated from August 9, 2007, when BNP Paribas terminated withdrawals from three hedge funds citing "a complete evaporation of liquidity". The bursting of the US housing bubble, which peaked at the end of 2006, caused the values of securities tied to


Question: What year did the U.S. housing bubble peak?

Answer: 2004

bubble existed in the U.S. Dean Baker identified the bubble in August 2002, thereafter repeatedly warning of its nature and depth, and the political reasons it was being ignored. Prior to that, Robert Prechter wrote about it extensively as did Professor Shiller in his original publication of "Irrational Exuberance" in the year 2000. The burst of the housing bubble was predicted by a handful of political and economic analysts, such as Jeffery Robert Hunn in a March 3, 2003, editorial. Hunn wrote: Many contested any suggestion that there could be a housing bubble, particularly at its peak from 2004 to


Question: What year did Congress pass the American Recover and Reinvestment Act?

Answer: 2009

and clarified that his comments were directed at certain tea party leaders and not the tea party as a whole. On February 13, 2009, Carson voted to pass the H.R. 1, the American Recovery and Reinvestment Act of 2009, a $787 billion economic stimulus package aimed at helping the economy recover from a deepening worldwide recession. This act included increased federal spending for health care, infrastructure, education, various tax breaks and incentives, and direct assistance to individuals. The ARRA has led to billions of dollars in investment in Carson's district, including grants to hire more police officers and save teaching


Question: Overvaluation of bundled subprime mortgages was based on the theory that housing prices would continue to do this?

Answer: escalate

US real estate pricing to plummet, damaging financial institutions globally. The financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for subprime borrowers; overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate; questionable trading practices on behalf of both buyers and sellers; compensation structures that prioritize short-term deal flow over long-term value creation; and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making. Questions regarding bank solvency, declines in credit availability, and damaged


Question: What is the name of the U.S. Senate report giving their conclusions for the cause of the crisis?

Answer: Levin–Coburn Report

policy expansion and institutional bailouts. There is some debate as to what role the repeal of Glass–Steagall had on the late 2000s financial crisis. Although there have been aftershocks, the financial crisis itself ended sometime between late 2008 and mid-2009. While many causes for the financial crisis have been suggested, with varying weight assigned by experts, the United States Senate issuing the Levin–Coburn Report found "that the crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to


Question: Which act was repealed in 1999 effectively removing the separation between investment and deposit banks?

Answer: Glass-Steagall Act

Wall Street Reform and Consumer Protection Act, was signed by President of the United States Barack Obama on July 22, 2010, following a global financial crisis. The Glass-Steagall Act of 1933 placed a "wall of separation" between banks and brokerages, which was largely repealed by the Financial Services Modernization Act of 1999. The bill was enacted during the Great Depression, which began with the Wall Street Crash of 1929. The Gramm–Leach–Bliley Act of 1999 repealed the "wall of separation," allowing companies to simultaneously act as commercial banks, investment banks, and insurance companies. Though some commentators regard the restoration of the


Question: What is the name of the commission who concluded the financial crisis was avoidable?

Answer: Financial Crisis Inquiry Commission

the 1930s, was investigated by the U.S. Financial Crisis Inquiry Commission, which concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and


Question: What agency failed to accurately price risk involved in mortgage-related financial products?

Answer: credit rating agencies

2006, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. Questions regarding bank solvency, declines in credit availability and damaged investor confidence affected global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined. Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets. Governments and central banks responded with unprecedented fiscal stimulus, monetary


Question: What practices should have been adjusted by governments to address 21st-century financial markets?

Answer: regulatory

2006, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. Questions regarding bank solvency, declines in credit availability and damaged investor confidence affected global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined. Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets. Governments and central banks responded with unprecedented fiscal stimulus, monetary


Question: What are MBS as related to the housing and credit booms?

Answer: mortgage-backed securities

the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the US housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses. Falling prices also resulted in homes worth less than the mortgage loan, providing the lender with a financial incentive to enter foreclosure. The ongoing foreclosure epidemic that began in late 2006 in


Question: When housing prices declined, who reported significant losses from being heavily invested in subprime MBS?

Answer: major global financial institutions

the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the US housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses. Falling prices also resulted in homes worth less than the mortgage loan, providing the lender with a financial incentive to enter foreclosure. The ongoing foreclosure epidemic that began in late 2006 in


Question: Who could invest in the U.S. housing market through MBS and CDO?

Answer: institutions and investors around the world

the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the US housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses. Falling prices also resulted in homes worth less than the mortgage loan, providing the lender with a financial incentive to enter foreclosure. The ongoing foreclosure epidemic that began in late 2006 in


Question: MBS and CDO derive their value from?

Answer: mortgage payments and housing prices

the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the US housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses. Falling prices also resulted in homes worth less than the mortgage loan, providing the lender with a financial incentive to enter foreclosure. The ongoing foreclosure epidemic that began in late 2006 in


Question: How much are total losses estimated to be from falling home prices?

Answer: trillions of U.S. dollars

Such financial innovation enabled institutions and investors around the world to invest in the U.S. housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in MBS reported significant losses. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses were estimated in the trillions of U.S. dollars globally. While the housing and credit bubbles were growing, a series of factors caused the financial system to become increasingly fragile. Policymakers did not recognize the increasingly important role played


Question: What is the financial incentive when a home is worth less than the mortgage loan?

Answer: foreclosure

from their homes." Economist Stan Leibowitz argued in the "Wall Street Journal" that the extent of equity in the home was the key factor in foreclosure, rather than the type of loan, credit worthiness of the borrower, or ability to pay. Although only 12% of homes had negative equity (meaning the property was worth less than the mortgage obligation), they comprised 47% of foreclosures during the second half of 2008. Homeowners with negative equity have less financial incentive to stay in the home. The "L.A. Times" reported the results of a study that found homeowners with high credit scores at


Question: What year did the foreclosure epidemic begin?

Answer: late 2006

the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the US housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses. Falling prices also resulted in homes worth less than the mortgage loan, providing the lender with a financial incentive to enter foreclosure. The ongoing foreclosure epidemic that began in late 2006 in


Question: What other financial instruments had significant defaults and losses as a result of the crisis expanding from housing to other parts of the economy?

Answer: other loan types

Such financial innovation enabled institutions and investors around the world to invest in the U.S. housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in MBS reported significant losses. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses were estimated in the trillions of U.S. dollars globally. While the housing and credit bubbles were growing, a series of factors caused the financial system to become increasingly fragile. Policymakers did not recognize the increasingly important role played


Question: What institutions comprise the shadow banking system?

Answer: investment banks and hedge funds

by financial institutions such as investment banks and hedge funds, also known as the shadow banking system. These entities were not subject to the same regulations as depository banking. Further, shadow banks were able to mask the extent of their risk taking from investors and regulators through the use of complex, off-balance sheet derivatives and securitizations. Economist Gary Gorton has referred to the 2007–2008 aspects of the crisis as a "run" on the shadow banking system. The complexity of these off-balance sheet arrangements and the securities held, as well as the interconnection between larger financial institutions, made it virtually impossible


Question: What institutions are not subject to the same regulations as commercial banks?

Answer: investment banks and hedge funds

business, which resulted in less oversight of activities and less disclosure of information about new activities undertaken by banks and other evolving financial institutions. Thus, policymakers did not immediately recognize the increasingly important role played by financial institutions such as investment banks and hedge funds, also known as the shadow banking system. Some experts believe these institutions had become as important as commercial (depository) banks in providing credit to the US economy, but they were not subject to the same regulations. These institutions, as well as certain regulated banks, had also assumed significant debt burdens while providing the loans described


Question: What process caused the financial system to both expand and become fragile?

Answer: financialization

the US and only reduced to historical levels in early 2014 drained significant wealth from consumers, losing up to $4.2 trillion in wealth from home equity. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses are estimated in the trillions of US dollars globally. While the housing and credit bubbles were building, a series of factors caused the financial system to both expand and become increasingly fragile, a process called financialization. US government policy from the 1970s onward has emphasized deregulation to encourage


Question: What policy has U.S. Government emphasized from the 1970's onward?

Answer: deregulation

the US and only reduced to historical levels in early 2014 drained significant wealth from consumers, losing up to $4.2 trillion in wealth from home equity. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses are estimated in the trillions of US dollars globally. While the housing and credit bubbles were building, a series of factors caused the financial system to both expand and become increasingly fragile, a process called financialization. US government policy from the 1970s onward has emphasized deregulation to encourage


Question: Some regulated banks did not have sufficient financial cushions in place to absorb what losses as a result of the financial crisis of 2007?

Answer: MBS

to re-organize them via bankruptcy, which contributed to the need for government bailouts. Some experts believe these shadow institutions had become as important as commercial (depository) banks in providing credit to the U.S. economy, but they were not subject to the same regulations. These institutions as well as certain regulated banks had also assumed significant debt burdens while providing the loans described above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses. The losses experienced by financial institutions on their mortgage-related securities impacted their ability to lend, slowing economic activity. Interbank lending dried-up


Question: What was a consequence of the large loan defaults and MBS losses in 2007?

Answer: slowing economic activity

above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses. These losses affected the ability of financial institutions to lend, slowing economic activity. Concerns regarding the stability of key financial institutions drove central banks to provide funds to encourage lending and restore faith in the commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments. The US Financial Crisis Inquiry Commission reported its findings in January 2011. It concluded that: The 2000s were the decade of


Question: Who provided funds to encourage lending and restore faith in commercial banks in the aftermath of the financial crisis of 2007?

Answer: central banks

above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses. These losses affected the ability of financial institutions to lend, slowing economic activity. Concerns regarding the stability of key financial institutions drove central banks to provide funds to encourage lending and restore faith in the commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments. The US Financial Crisis Inquiry Commission reported its findings in January 2011. It concluded that: The 2000s were the decade of