The GFC 2008-09

Question 1

Helleiner, 2011 finds 4 main causes of the GFC; which are?

Answer 1

1. weak regulatory climate
2. the invention of securitization
3. cheap credit environment
4. global imbalances: creditor and debtor countries

Question 2

Nelson and Katzenstein, 2014, define and use the concept of convention in what manner?

Answer 2

Conventions are shared social templates for managing epistemic insecurity

Question 3

What do Nelson and Katzenstein (2014) think about the distinction between uncertainty and risk?

Answer 3

World of finance is inherently uncertain, not only risky. Financial agents adopt conventions to deal with said uncertainty. There can be: market sentiment, panic, group shocks

Question 4

Where did conventions intervene to push the financial world towards crisis for Nelson and Katzenstein (2014)?

Answer 4

1. excessive risk taking
2. mortgage securitization
3. risk management models
4. Central Bank practices

Question 5

What are the three channels through which conventions turn into established practices, according to Nelson and Katzenstein (2014)?

Answer 5

1. competition
2. learning
3. emulation

Question 6

Chwieroth and Walter (2019) identify two reasons for increase in bailouts and govt interventions around financial crisis:

Answer 6

1. financialisation of mass wealth
2. democratisation

Question 7

Chwieroth and Walter (2019) renders political action around financial crisis as:

Answer 7

• slow and inefficient due to delay in action
• very politically unpopular

Electorat expects their wealth to be protected AND banks to not be bailed out and priviledged

Question 8

According to Chwieroth and Walter (2019), why does the electorate deem most interventions as unfair and politically unpopular?

Answer 8

• during financial crisis, middle class loses the most in terms of wealth, because their assets are real estate + pension funds
• regionality: people at periphery, who have most to lose by falling asset value, removed from financial centre where bailouts happen

Question 9

What does Tooze, 2018, have to say about the nature of the GFC?

Answer 9

The GFC was a truly global crisis:
- cheap credit exists due to influx of capital into the US that the Fed cannot counteract
- European Banks are strongly involved in buying subprime loans, the ones Fannie’s and Freddie’s weren’t backstopping