Understanding the Causative Factors of the Subprime Mortgage Crisis: An Examination of Current Literature
Though we are bombarded with facts and figures about the recent financial crisis continuously, our understanding of the crisis evolves daily. We are constantly hypothesizing and revising ideas about causes and consequences of the crisis – many of which will not be confirmed for years to come: U.S. Treasury Secretary Paulson, who was a former Wall Street banker, warned that the crisis is not short term and will be with us for a while (Callan, Grant, & Barber, 2007). In order to learn from past mistakes, it is critical that we attempt to develop a complete understanding of how and why this crisis occurred– the worst since the Great Depression, longer than those of 1973-1975 and 1981-1982 (Harding, 2010). This paper will examine and review current literature on the recent financial crisis, specifically, a history and overview of the financial innovations involved and a synthesis of the causes of the crisis.
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By Dennis Chao