Lecture #10 - Ec 136, Financial Economics Lecture 10...

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Ec 136, Financial Economics Lecture 10 October 1
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Outline for today 1. Crisis of 2008 2. Bank runs www.econ.berkeley.edu/~szeidl/ec136/ec136index.htm
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1. Crisis of 2008: narrative When housing boom burst, investment banks caught holding bad mortgages { Bought with borrowed money (high leverage) Housing prices adjust slowly = ) slow motion crash { 2007 fall: Northern Rock bailed out { 2008 spring: Bear Stearns bailed out { 2008 summer: federal takeover of Fannie Mae and Freddie Mac { 2008 fall: Lehman bankrupt, AIG bailed out
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0 50 100 150 200 250 January 1987 November 1987 September 1988 July 1989 May 1990 March 1991 January 1992 November 1992 September 1993 July 1994 May 1995 March 1996 January 1997 November 1997 September 1998 July 1999 May 2000 March 2001 January 2002 November 2002 September 2003 July 2004 May 2005 March 2006 January 2007 November 2007 Real housing prices Housing cannot be reflated!
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2. Bank runs Assets Liabilities illiquid CMOs
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This note was uploaded on 09/02/2010 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at University of California, Berkeley.

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Lecture #10 - Ec 136, Financial Economics Lecture 10...

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