The 2007 Meltdown in Structured Securitization: Searching for Lessons not Scapegoats

By G. Caprio, Asli Demirgüç-Kunt, Edward J. Kane. 2008

149 citations recorded by the source corpus.

The intensity of the crisis in financial markets has surprised nearly everyone. The authors search out the root causes of the crisis, distinguishing them from scapegoating explanations that have been used in policy circles to divert attention from the underlying breakdown of incentives. Incentive conflicts explain how securitization went wrong, why credit ratings proved so inaccurate, and why it is superficial to blame the crisis on mark-to- market accounting, an unexpected loss of liquidity, trends in globalization, and deregulation in financial markets. The authors analysis finds disturbing implications of the crisis for Basel II and its implementation. They conclude by drawing out lessons for developing countries and identifying reforms that will improve incentives by increasing transparency and accountability in government and industry alike.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/ab53a1fc68f63ef7b7ae7612ed205d33246c634f

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Citations in the corpus

Are All the Sacred Cows Dead? Implications of the Financial Crisis for Macro- and Financial Policies (2010, background): “This applies also to the case of inflow controls; see Carvalho and Garcia (2006) for a detailed account of evasion strategies employed by investors in Brazil. 35. As evasion strategies often involve setup costs (as well as the possibility of penalties), they are more easily available to large, wealt”
Supervisory Effectiveness and Bank Risk (2011, background): “A handful of interrelated explanations have been offered, one of the most interesting of which involves supervisory inertia (e.g., Blanchard, 2008; Caprio et al., 2008).”