Causes of the economic crisis: Can the flap of a butterfly wing in Brazil destroy the Coliseum … after 30 years?

Giorgio Szego

Journal of Risk Management in Financial Institutions, 2011, vol. 4, issue 3, 216-228

Abstract: The current US-made economic crisis was caused by unintended perverse consequences of remote well-meaning political decisions, such as the 1977 Community Reinvestment Act and the demagogic exploitation of government-sponsored enterprises (GSEs) such as Fannie Mae etc that began in the 1990s. The fivefold interest rate increases in the USA between 2003 and 2008 that charged an additional US$70bn to the three million holders of adjustable rate mortgages (ARMs) triggered the crash.

Keywords: adjustable rate mortgages; US Federal Funds; financial crisis (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2011:v:4:i:3:p:216-228

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