Overview

The degree to which the many components of the financial system are intermingled was made abundantly clear by the sequence of events that led to the global financial crisis. Before 2007, few people had heard much about the US subprime mortgage sector, and terms like ‘credit crunch’ and ‘toxic debt’ had yet to enter into everyday usage. However, problems in the subprime area and rapid declines in the values of some of the associated assets, led to unprecedented difficulties across the global financial system.

This tutorial describes the unfolding of this watershed event, from the development of the crisis in the US subprime mortgage market to its spread across global markets and institutions. It also looks at how the authorities responded, and the lessons to be learned for future generations.

Objective

On completion of this tutorial, you will be able to:
- Describe the extraordinary growth and collapse of the US subprime mortgage market
- Explain how the securitization of subprime mortgages lay at the heart of the wider impact of the crisis
- Realize the magnitude of the crisis as emphasized by the number and type of institutions, markets, and countries affected
- Describe some of the main factors that caused the crisis
- Outline the response of governments and financial authorities to the crisis

Content

Topic 1: The Starting Point
Topic 2: The Spread
Topic 3: The Casualties
Topic 4:The Causes
Topic 5: The Response