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Impact of Financial Markets on Economic Stability and Growth: The Case of Sub-Prime Mortgage Lending - page 36 / 42

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1/23/2015

Jamshid Damooei, PhD

36

What to Look for in the Months or Years Ahead….Continued

Is there anything to be learned for the future?

Who are responsible? Every party involved for their own reason:

Fed did not want to prevent the problems despite warning for a number of reasons:

Encourage economic growth through booming real estate market in face of a troubling stock market.

Assisting low income households in becoming home owners

Not having the means of controlling credits and setting standards in the market.

Political pressure in being seen as an organization impeding the booming real estate market.

Lenders were equally or even more responsible for taking advantage and luring borrowers to borrow at a relatively higher rate and larger amount that they could afford to borrow.

Bowers were responsible for underestimating the risk and aiming to take advantage of the easy credit market for the hope of earning higher equity in a booming real estate market.

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