How we got here?
financial deregulation
- investment banks (Lehman brothers): mortgage loans, especially subprime with higher interest rate→house purchase increased, house price increased→make huge profits (not real profits)→financial bubble
- insurance companies (AIG): sell derivatives (credit default swaps) to investors
*rating agencies: earn money buy giving high rating to risky securities
When the market of derivatives collapsed, banking industry was sinking. Due to globalisation, the global economy was linked. Therefore, global recession→a series of problems like unemployment→"At the end of the day, the poorest pay the most"
Accountability:
- banks: lobbying→political influence
- academy (economic discipline): powerful role in shaping US gov policy; advocate of financial deregulation; interest problem (get paid by banks: working inside or writing paper to bank's interest); very few warned of this crisis
Obama administration after 2008:
very little reform of financial industry
still high bank compensation
08年金融危机实录
