Deciphering the Liquidity and Credit Crunch 2007 – 2008 Flashcards
1
Q
Factors leading to housing bubble
A
- Low interest rates in the U.S.
- Decline in lending standards
- Increased popularity of structured products
2
Q
Why there were Low interest rates in the U.S. before housing bubble
A
– Capital inflows (Asia)
– Lax interest rates by FED
3
Q
Why there was decline in lending standards during the housing bubble
A
“originate and distribute” model and other trends in banking industry
