This case focuses on the financial difficulties in the United States during the period from August to December 2006, as well as its roots in subprime lending. After a brief discussion, as mortgages were structured and traded in the pre-1990 period, it describes the sub-prime mortgage lending, as well as other innovative mortgage loans in 1990. He also discusses how these mortgages were packaged into securities, and who eventually came to own the claims and the associated risks. The case then describes the pain inflicted by increasing foreclosures, as well as the financial implications of the growth of the mortgage market offenses. It also chronicles the reaction of the U.S. and the European Central Bank to the unfolding financial difficulties. Finally, in the case lies with policies that have been proposed to address either the causes or consequences of the crisis. They include policies to reform the oversight of the financial system by changing the bankruptcy rules and regulation of mortgage lending. Some attention is paid to the role of credit rating agencies in the crisis in the financial system as a whole. "Hide
by Julio J. Rotemberg Source: HBS Premier Case Collection 21 pages. Publication Date: January 18, 2008. Prod. #: 708042-PDF-ENG
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