The Panic of 2007
How did problems with subprime mortgages result in a systemic crisis, a panic? The ongoing Panic of 2007 is due to a loss of information about the location and size [...]
Freddie Mac and Fannie Mae: An Exit Strategy for the Taxpayer
The Fannie Mae-Freddie Mac crisis may have been the most avoidable financial crisis in history. Economists have long complained that the risks posed by the government-sponsored enterprises were large relative [...]
Market Responses to the Panic of 2008
We model the panic of 2008 as part of the wealth and substitution effects deriving from a housing price crash that began in 2006. The dissipation of the wealth effect [...]
The Political Economy of the U.S. Mortgage Default Crisis
We examine the determinants of congressional voting behavior on two of the most significant pieces of federal legislation in U.S. economic history: the American Housing Rescue and Foreclosure Prevention Act [...]
How Did We Get Into This Financial Mess
The expansion in risky mortgages to underqualified borrowers was encouraged by the federal government. The growth of “creative” nonprime lending followed Congress’s strengthening of the Community Reinvestment Act, the Federal [...]
House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis
Using individual-level data on homeowner debt and defaults from 1997 to 2008, we show that borrowing against the increase in home equity by existing homeowners is responsible for a significant [...]
Would a Stricter Fed Policy and Financial Regulation Have Averted the Financial Crisis
Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated [...]
Three Decades of Politics and Failed Policy at HUD
The U.S. Department of Housing and Urban Development has long been plagued by scandals, mismanagement, and policy failures. Most recently, HUD’s subsidies and failed oversight of Fannie Mae and Freddie [...]
Lessons from the Great American Real Estate Boom and Bust of the 1920s
Although long obscured by the Great Depression, the nationwide "bubble" that appeared in the early 1920s and burst in 1926 was similar in magnitude to the recent real estate boom [...]
Household Leverage and the Recession of 2007 to 2009
We show that household leverage as of 2006 is a powerful statistical predictor of the severity of the 2007 to 2009 recession across U.S. counties. Counties in the U.S. that [...]