Publication Date
Spring 2017
School
School of Business
Major
Business: Economics; Business: Finance; Business: International Business
Keywords
Subprime Mortgage, Collateralized Debt Obligation, Mortgage Backed Security
Disciplines
Finance and Financial Management | Portfolio and Security Analysis | Real Estate
Recommended Citation
Krmpotich, Joseph, "The Subprime Mortgage Collapse and Its Effects on the Economy" (2017). Senior Honors Theses. 658.
https://digitalcommons.liberty.edu/honors/658
Abstract
The subprime mortgage crisis occurred due to a number of factors. Included in these factors were the issuance of subprime loans, the securitization of mortgages in the investment banking system, and the deregulation and ultimate failure of the shadow banking system. These causes were evident in both historical trends in the stock market as well as the macroeconomic data leading into the crash. They were perpetuated by investors, mortgage brokers, and banks taking on an abnormal amount of risk in the early 2000s for both psychological and behavioral reasons. These causes, while less than obvious at the time, have, with the benefit of hindsight, become clearer. Thus, the subprime mortgage crisis and subsequent recession were entirely avoidable and could have been prevented.
Included in
Finance and Financial Management Commons, Portfolio and Security Analysis Commons, Real Estate Commons
