When it comes to the crunch: What are the drivers of the US banking crisis?

Eliot Heilpern, Colin Haslam and Tord Andersson

Accounting forum, 2009, vol. 33, issue 2, 99-113

Abstract: This article considers how permissive regulatory conditions helped change the size and scope of the US mortgage market. Asset backed securitization facilitated an expansion of the US mortgage market and modified the structure of the value chain within which financial assets, risk and liquidity were managed. New sophisticated mortgage products, indulgent lending practices, loose credit assessment and flimsy documentation increased the probability of mortgage default in an economic downturn. US banks were not in a position to absorb mark-to-market losses on mortgage assets and goodwill impairment resulting from a credit crunch because they operate with narrow profit margins and a limited equity cushion in the balance sheet. This article questions the viability and sustainability of this banking business model.

Keywords: US credit crisis; Mortgage securitization; Financial value chain; Risk and liquidity (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:accfor:v:33:y:2009:i:2:p:99-113

DOI: 10.1016/j.accfor.2009.03.001

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