Global Financial Crisis

There were a number of causes to the global financial crisis of 2007-2009. Baily, Litan and Johnson (2008) argue that there were numerous contributing factors, including the perception of a low risk U.S. housing market, securitization of the housing market, credit rating agencies, and the spread of these securities to financial institutions around the world. The primary contagion came from the United States, beginning in 2007, but there were contributing factors in many European countries as well.

housing market entered a bubble state, with rapidly increasing prices. This was the result of changes to the way that mortgages were financed, bringing more and riskier consumers into the housing market. This in turn fuelled speculators. Banks were able to securitize risk from the housing marketing. In complex transactions they were able to offload much of the risk onto other financial institutions around the world. Credit rating agencies, lacking...
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