The Subprime Crisis: Lessons About Market Discipline

Mark J. Flannery
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Mark J. Flannery: University of Florida, USA

Chapter 17 in The First Credit Market Turmoil of the 21st Century:Implications for Public Policy, 2009, pp 281-303 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractDuring the subprime crisis, market forces have not generally led firms to follow prudent operational procedures. Market prices (CDS spreads) differentiated stronger from weaker firms, but provided no advance indication of large risk concentrations in specific firms. Poor government supervision also contributed to the crisis. The information provided by market prices can be used effectively to hasten supervisory actions, which will reduce the social cost of financial failures.

Keywords: Financial Crises; Systemic Risk; Credit Market Turmoil; International Financial Markets (search for similar items in EconPapers)
Date: 2009
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