Great Recession

Question 1

What did the expanded balance sheet of the Fed contain?

Answer 1

Corporate Bonds, MBSs, CDOs, stocks of banks. They wanted to prop up asset prices, raise money supply and prevent deflation.

Question 2

What was early-cause

Answer 2

low interest rates on safe stuff in early 2000’s led investors to seek higher returns in Mortgage Backed Securities and Collateralized Debt Obligations.

Question 3

Why was the free-market at fault?

Answer 3

Risky behavior of banks, unscrupulous lending practices led to meltdown.