Here is a link to the data I collected in the survey I performed.
For this assignment, I created the survey, asking questions that I believe to be most important in regards to my topic. I then posted the link to the class, and got a few responses from classmates. The best response I received, however, was from my facebook friends. I learned a lot from performing this survey. I learned that the financial crisis affected nearly everyone on at least some level. A classmate pointed out that I made an error on the question of whether anyone you know has lost their jobs. I didn't realize that I forgot to include a N/A response. I find it shocking that out of 14 people who took the survey, he was the only person who did not personally know someone who has lost their job since 2008.
Monday, November 28, 2011
RJA #13b: Presentation Plan
I plan to highlight and outline my topic, starting with the historical context of the crisis, including the major factors that my research has led me to believe to have helped in causing the financial crisis. I will then go through each of these factors, and detail why they had an impact on the severity of the crisis. Finally, I will describe which factor I believe had the most significant impact on the crisis and the economy as a whole.
Monday, November 21, 2011
RJA #13a: APA-Style Annotated Bibliography, Part 2
Milken, M., Becker, G., Scholes, M., Spence, M., & Phelps, E. (June 01, 2008). US Financial
Crisis Is a Black Eye for Capitalism. New Perspectives Quarterly, 25, 3, 70-73.
The writers of this piece are all Nobel laureates in economics. In this piece, they have a discussion on the downsides of capitalism.
Harvey, D. (2010). The enigma of capital, and the crises of capitalism. (Kindle ed.). New York, NY: Oxford Univ Pr.
This paper is a Government Accountability Office release that includes testimony given to the GAO in their investigation into the financial crisis.
Economic Populist. (Producer). (2011). Subprime mortgage volumes. [Web Graphic]. Retrieved from http://www.economicpopulist.org/content/subprime-meltdown-over-now-comes-bad-news
This will be one of the graphics I plan to use to highlight the number of subprime mortgages in the years leading up to the 2008 crisis.
Federal Reserve. (Producer).(2001, November 7). Consumer credit outstanding. Retrieved from http://www.federalreserve.gov/Releases/G19/hist/cc_hist_sa.html
I used this site for information regarding the amount of revolving debt historically speaking.
Wolff, R.,PhD. (Performer) (2009).Capitalism hits the fan [Web]. Retrieved from http://www.capitalismhitsthefan.com/
This video is a great supplement to watch on the topic of the financial crisis, this professor has a very informative take on the crisis.
Crisis Is a Black Eye for Capitalism. New Perspectives Quarterly, 25, 3, 70-73.
The writers of this piece are all Nobel laureates in economics. In this piece, they have a discussion on the downsides of capitalism.
Harvey, D. (2010). The enigma of capital, and the crises of capitalism. (Kindle ed.). New York, NY: Oxford Univ Pr.
This paper is a Government Accountability Office release that includes testimony given to the GAO in their investigation into the financial crisis.
Economic Populist. (Producer). (2011). Subprime mortgage volumes. [Web Graphic]. Retrieved from http://www.economicpopulist.org/content/subprime-meltdown-over-now-comes-bad-news
This will be one of the graphics I plan to use to highlight the number of subprime mortgages in the years leading up to the 2008 crisis.
Federal Reserve. (Producer).(2001, November 7). Consumer credit outstanding. Retrieved from http://www.federalreserve.gov/Releases/G19/hist/cc_hist_sa.html
I used this site for information regarding the amount of revolving debt historically speaking.
Wolff, R.,PhD. (Performer) (2009).Capitalism hits the fan [Web]. Retrieved from http://www.capitalismhitsthefan.com/
This video is a great supplement to watch on the topic of the financial crisis, this professor has a very informative take on the crisis.
Saturday, November 12, 2011
RJA #12c: Visual Aids
I think that there are many visual aides that I will be able to include in my paper. I will use the vast resource of graphics that are available on the official Financial Crisis Inquiry Commission website: http://fcic.law.stanford.edu/resource
One set of graphics that I found that I believe will be very informative to the readers of my paper describe the ways in which the mortgage securities operate, i.e. one called 'THE THEORY OF HOW THE FINANCIAL SYSTEM CREATED AAA-RATED ASSETS OUT OF SUBPRIME MORTGAGES gives a detailed picture of how exactly these mortgage backed securities came to have AAA ratings.
Another graphic in the mortgage securities set is one titled COLLATERALIZED DEBT OBLIGATIONS and shows a simplified version of how CDO's work.
A third graphic I plan to use is titled REJECTED LOANS WAIVED IN BY SELECTED BANKS, and it is a table of the percentages of loans 'waived in' or approved, regardless of the fact that the borrowers were denied in the application process.
Another graphic that I really like is the one titled LOAN PERFORMANCE IN VARIOUS MORTGAGE MARKET SEGMENTS. This one is a bar graph showing that the subprime segment had nearly a 40% average delinquency rate in 2009, among other figures.
Lastly, I will use the graphic titled NOTIONAL AMOUNT OF OTC DERIVATIVES OUTSTANDING, and it shows the sheer volume of market value that derivatives held in these years.
One set of graphics that I found that I believe will be very informative to the readers of my paper describe the ways in which the mortgage securities operate, i.e. one called 'THE THEORY OF HOW THE FINANCIAL SYSTEM CREATED AAA-RATED ASSETS OUT OF SUBPRIME MORTGAGES gives a detailed picture of how exactly these mortgage backed securities came to have AAA ratings.
Another graphic in the mortgage securities set is one titled COLLATERALIZED DEBT OBLIGATIONS and shows a simplified version of how CDO's work.
A third graphic I plan to use is titled REJECTED LOANS WAIVED IN BY SELECTED BANKS, and it is a table of the percentages of loans 'waived in' or approved, regardless of the fact that the borrowers were denied in the application process.
Another graphic that I really like is the one titled LOAN PERFORMANCE IN VARIOUS MORTGAGE MARKET SEGMENTS. This one is a bar graph showing that the subprime segment had nearly a 40% average delinquency rate in 2009, among other figures.
Lastly, I will use the graphic titled NOTIONAL AMOUNT OF OTC DERIVATIVES OUTSTANDING, and it shows the sheer volume of market value that derivatives held in these years.
RJA #12b: APA-Style Annotated Bibliography, Part 1–
Lowenstein, R. (2010). The end of wall street. (1st ed.). New York, NY: Penguin Press.
Roger Lowenstein has worked as a wall street journal reporter, and is now a columnist for Bloomberg. The book describes in detail the years leading up to the crash in 2008, and advocates against the idea that Wall Street is capable of self regulation.
Lewis, M. (2010). The big short. (1st ed.). New York, NY: W. W. Norton & Company.
Michael Lewis was once a wall street adviser, and has since written two books about his experiences there. He outlines the use of securities and derivatives and their roles in the collapse of the markets in 2008.
Lambert, E. (2011). The futures. (1st ed.). New York, NY: Basic books.
The author, Emily Lambert, is senior writer for Forbes, covering finance and trading. The book discusses the inner details of the Chicago Mercantile Exchange and Chicago Board of Trade, which were the first futures market in the world. The book outlines methods of speculation in these markets, and details the financial trading markets.
Roger Lowenstein has worked as a wall street journal reporter, and is now a columnist for Bloomberg. The book describes in detail the years leading up to the crash in 2008, and advocates against the idea that Wall Street is capable of self regulation.
Lewis, M. (2010). The big short. (1st ed.). New York, NY: W. W. Norton & Company.
Michael Lewis was once a wall street adviser, and has since written two books about his experiences there. He outlines the use of securities and derivatives and their roles in the collapse of the markets in 2008.
Lambert, E. (2011). The futures. (1st ed.). New York, NY: Basic books.
The author, Emily Lambert, is senior writer for Forbes, covering finance and trading. The book discusses the inner details of the Chicago Mercantile Exchange and Chicago Board of Trade, which were the first futures market in the world. The book outlines methods of speculation in these markets, and details the financial trading markets.
RJA #12a: Conversion from MLA to APA Style
Financial Crisis Inquiry Commission. (2011). Financial crisis inquiry report. Washington, D.C.: Financial Crisis Inquiry Commission.
Paulson, Jr., H. M. (2010). On the brink. (1 ed.). New York, NY: Business Plus.
Koepp, S. (1987, July 06). Rolling back regulation. TIME, Retrieved from http://www.time.com/time/magazine/article/0,9171,964890,00.html
Paulson, Jr., H. M. (2010). On the brink. (1 ed.). New York, NY: Business Plus.
Koepp, S. (1987, July 06). Rolling back regulation. TIME, Retrieved from http://www.time.com/time/magazine/article/0,9171,964890,00.html
RJA #11: Argument
Claim:
Deregulation of the financial and banking sectors, leading to the increased use of complex financial instruments, had a major role in causing the crash in 2008.
(page xviii of the Financial Crisis Inquiry Report)
Reason 1: The FCIC concluded that failures in regulation and supervision led to the collapse of the financial markets (Financial crisis inquiry report page xviii)
Therefore, the majority of the commission whose job it was to investigate the crisis believes that deregulation of the financial markets had a key role in causing the economic collapse in 2008. They also stated that the passage of The Commodity Futures Modernization Act of 2000 effectively eliminated oversight by both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). This elimination of oversight as well as the changing of bankruptcy laws in 2005 caused a boom in the derivative market.
(Financial crisis inquiry report page 48)
Reason 2: The unregulated use of Derivatives as an investment tool contributed greatly to the instability of the financial system (Financial crisis inquiry report pagexxiv).
As stated in reason 1, the derivative market boomed in the few short years between 2005 and 2008. Although a short time period, the effects of this unregulated sector of the market caused great damage to the entire economy. To put it into perspective, in 2000, the derivative market value was $3.2 trillion, while in 2008, the market value was $20.3 trillion. The problem with the derivative market is that little or no collateral is needed to make very risky transactions usually involving a lot of money.
(Financial crisis inquiry report page 48 and 49)
Reason 3: The financial crisis could have been averted had the big mortgage banks been scrutinized by more prudent lending standards (Financial crisis inquiry report page xix and page xxiii).
During the years of the housing boom, from the early 2000's to 2008, mortgage lenders began utilizing more and more lenient standards for giving people mortgages. The "safe mortgage", the 30 year fixed rate with 20% down, was all but abandoned in favor of mortgages that were easier to get; no need for documentation, down payment, or a great FICO score, there is a mortgage for you. On top of the riskier borrowers, banks were betting that home prices would never decrease, and had bet a lot. (Financial crisis inquiry report page 4-6)
Objection 1: The deregulation of the financial markets and the use of derivatives were not the cause of the financial crisis (Dissenting view of Peter Wallison, FCIC, Financial Crisis Inquiry Report, page 443).
It was a key factor, because with regulations of the derivative market, rampant speculation and banks like Lehman Brothers could have never leveraged 30 to 1 with investors' money.
Objection 2: The cause of the financial crisis was, in fact, the proliferate of subprime mortgages in the years leading up to 2008 (Dissenting view of Peter Wallison, FCIC, Financial Crisis Inquiry Report, page 444).
I agree that this is one very important cause of the collapse as well, but not the only one.
Deregulation of the financial and banking sectors, leading to the increased use of complex financial instruments, had a major role in causing the crash in 2008.
(page xviii of the Financial Crisis Inquiry Report)
Reason 1: The FCIC concluded that failures in regulation and supervision led to the collapse of the financial markets (Financial crisis inquiry report page xviii)
Therefore, the majority of the commission whose job it was to investigate the crisis believes that deregulation of the financial markets had a key role in causing the economic collapse in 2008. They also stated that the passage of The Commodity Futures Modernization Act of 2000 effectively eliminated oversight by both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). This elimination of oversight as well as the changing of bankruptcy laws in 2005 caused a boom in the derivative market.
(Financial crisis inquiry report page 48)
Reason 2: The unregulated use of Derivatives as an investment tool contributed greatly to the instability of the financial system (Financial crisis inquiry report pagexxiv).
As stated in reason 1, the derivative market boomed in the few short years between 2005 and 2008. Although a short time period, the effects of this unregulated sector of the market caused great damage to the entire economy. To put it into perspective, in 2000, the derivative market value was $3.2 trillion, while in 2008, the market value was $20.3 trillion. The problem with the derivative market is that little or no collateral is needed to make very risky transactions usually involving a lot of money.
(Financial crisis inquiry report page 48 and 49)
Reason 3: The financial crisis could have been averted had the big mortgage banks been scrutinized by more prudent lending standards (Financial crisis inquiry report page xix and page xxiii).
During the years of the housing boom, from the early 2000's to 2008, mortgage lenders began utilizing more and more lenient standards for giving people mortgages. The "safe mortgage", the 30 year fixed rate with 20% down, was all but abandoned in favor of mortgages that were easier to get; no need for documentation, down payment, or a great FICO score, there is a mortgage for you. On top of the riskier borrowers, banks were betting that home prices would never decrease, and had bet a lot. (Financial crisis inquiry report page 4-6)
Objection 1: The deregulation of the financial markets and the use of derivatives were not the cause of the financial crisis (Dissenting view of Peter Wallison, FCIC, Financial Crisis Inquiry Report, page 443).
It was a key factor, because with regulations of the derivative market, rampant speculation and banks like Lehman Brothers could have never leveraged 30 to 1 with investors' money.
Objection 2: The cause of the financial crisis was, in fact, the proliferate of subprime mortgages in the years leading up to 2008 (Dissenting view of Peter Wallison, FCIC, Financial Crisis Inquiry Report, page 444).
I agree that this is one very important cause of the collapse as well, but not the only one.
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