The world's best financial minds help us understand today's
financial crisis

With so much information saturating the market for the everyday
investor, trying to understand why the economic crisis happened and
what needs to be done to fix it can be daunting. There is a real
need, and demand, from both investors and the financial community
to obtain answers as to what really happened and why.

Lessons from the Financial Crisis brings together the
leading minds in the worlds of finance and academia to dissect the
crisis. Divided into three comprehensive sections-The Subprime
Crisis; The Global Financial Crisis; and Law, Regulation, the
Financial Crisis, and The Future-this book puts the events that
have transpired in perspective, and offers valuable insights into
what we must do to avoid future missteps.

* Each section is comprised of chapters written by experienced
contributors, each with his or her own point of view, research, and
conclusions

* Examines the market collapse in detail and explores safeguards
to stop future crises

* Encompasses the most up-to-date analysis from today's leading
financial minds

We currently face a serious economic crisis, but in
understanding it, we can overcome the challenges it presents. This
well-rounded resource offers the best chance to get through the
current situation and learn from our mistakes.

ROBERT W. KOLB is the Frank W. Considine Chair of Applied Ethics and Professor of Finance at Loyola University, Chicago. Before this, he was the assistant dean, Business and Society, and director, Center for Business and Society, at the University of Colorado at Boulder and department chairman at the University of Miami. Kolb has authored over twenty books on finance, derivatives, and futures, as well as numerous articles in leading finance journals.

Zusammenfassung

The world's best financial minds help us understand today's financial crisis

With so much information saturating the market for the everyday investor, trying to understand why the economic crisis happened and what needs to be done to fix it can be daunting. There is a real need, and demand, from both investors and the financial community to obtain answers as to what really happened and why.

Lessons from the Financial Crisis brings together the leading minds in the worlds of finance and academia to dissect the crisis. Divided into three comprehensive sections-The Subprime Crisis; The Global Financial Crisis; and Law, Regulation, the Financial Crisis, and The Future-this book puts the events that have transpired in perspective, and offers valuable insights into what we must do to avoid future missteps.

• Each section is comprised of chapters written by experienced contributors, each with his or her own point of view, research, and conclusions
• Examines the market collapse in detail and explores safeguards to stop future crises
• Encompasses the most up-to-date analysis from today's leading financial minds

We currently face a serious economic crisis, but in understanding it, we can overcome the challenges it presents. This well-rounded resource offers the best chance to get through the current situation and learn from our mistakes.

Acknowledgments xv

Editor's Note xvii

Introduction xix

PART I Overview of the Crisis 1

1 Leverage and Liberal Democracy 3
George Bragues

2 A Property Economics Explanation of the Global Financial Crisis 9
Gunnar Heinsohn and Frank Decker

3 Of Subprimes and Sundry Symptoms: The Political Economy of the Financial Crisis 17
Ashok Bardhan

4 The Political Economy of the Financial Crisis of 2008 23
Roger D. Congleton

5 The Global Financial Crisis of 2008: WhatWent Wrong? 31
Hershey H. Friedman and Linda Weiser Friedman

6 The Roots of the Crisis and How to Bring It to a Close 37
James K. Galbraith

7 Enron Rerun: The Credit Crisis in Three Easy Pieces 43
Jonathan C. Lipson

8 The Global Crisis and Its Origins 51
Peter L. Swan

9 Four Paradoxes of the 20082009 Economic and Financial Crisis 59
John E. Marthinsen

10 Understanding the Subprime Financial Crisis 69
Steven L. Schwarcz

PART II Causes and Consequences of the Financial Crisis 77

11 The Origins of the Financial Crisis 79
Martin N. Baily, Robert E. Litan, and Matthew S. Johnson

12 Ten Myths about SubprimeMortgages 87
Yuliya Demyanyk

13 The Financial Crisis: How Did We Get Here and Where Do We Go Next? New Evidence on How the Crisis Spread Among Financial Institutions 95
James R. Barth, Tong Li, Lu Wenling, and Glenn H. Yago

14 A Decade of Living Dangerously: The Causes and Consequences of theMortgage, Financial, and Economic Crises 103
Jon A. Garfinkel and Jarjisu Sa-Aadu

15 Making Sense of the Subprime Crisis 109
Kristopher S. Gerardi, Andreas Lehnert, Shane M. Sherlund, and Paul Willen

16 Miraculous Financial Engineering or Legacy Assets? 119
Ivo Pezzuto

17 TheMaking and Ending of the Financial Crisis of 20072009 125
Austin Murphy

18 The SubprimeMortgage Problem: Causes and Likely Cure 133
Ronald D. Utt

19 Sequence of Asset Bubbles and the Global Financial Crisis 139
Abol Jalilvand and A. G. (Tassos) Malliaris

PART III Borrowers 147

20 The Past, Present, and Future of Subprime Mortgages 149
Shane M. Sherlund

21 FHA Loans and Policy Responses to Credit Availability 155
Dr. Marsha Courchane, Rajeev Darolia, and Dr. Peter Zorn

22 The Single-Family Mortgage Industry in the Internet Era: Technology Developments and Market Structure 163
Forrest Pafenberg

23 Speed Kills? Mortgage Credit Boom and the Crisis 175
Giovanni Dell'Ariccia, Deniz Igan, and Luc Laeven

24 SubprimeMortgages:What We Have Learned From a New Class of Homeowners 181
Todd J. Zywicki and Satya Thallam

25 Rating Agencies: Facilitators of Predatory Lending in the SubprimeMarket 191
David J. Reiss

PART IV The Process of Securitization 197

26 A Primer on the Role of Securitization in the Credit Market Crisis of 2007 199
John D. Martin

27 Incentives in the Originate-to-DistributeModel of Mortgage Production 209
Robert W. Kolb

28 Did Securitization Lead to Lax Screening? Evidence from Subprime Loans 217
Benjamin J. Keys, Tanmoy Mukherjee, Amit Seru, and Vikrant Vig

29 Tumbling Tower of Babel: Subprime Securitization and the Credit Crisis 225
Bruce I. Jacobs

30 The Incentives of Mortgage Servicers and Designing Loan Modifications to Address the Mortgage Crisis 231
Larry Cordell, Karen Dynan, Andreas Lehnert, Nellie Liang, and Eileen Mauskopf

31 The Contribution of Structured Finance to the Financial Crisis: An Introductory Overview 239
...