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The Rise and Fall of the US Mortgage and Credit Markets: A Comprehensive Analysis of the Market Meltdown

ISBN: 978-0-470-47724-3
526 pages
May 2009
The Rise and Fall of the US Mortgage and Credit Markets: A Comprehensive Analysis of the Market Meltdown (0470477245) cover image


The mortgage meltdown: what went wrong and how do we fix it?

Owning a home can bestow a sense of security and independence. But today, in a cruel twist, many Americans now regard their homes as a source of worry and dashed expectations. How did everything go haywire? And what can we do about it now?

In The Rise and Fall of the U.S. Mortgage and Credit Markets, renowned finance expert James Barth offers a comprehensive examination of the mortgage meltdown. Together with a team of economists at the Milken Institute, he explores the shock waves that have rippled through the entire financial sector and the real economy. Deploying an incredibly detailed and extensive set of data, the book offers in-depth analysis of the mortgage meltdown and the resulting worldwide financial crisis. This authoritative volume explores what went wrong in every critical area, including securitization, loan origination practices, regulation and supervision, Fannie Mae and Freddie Mac, leverage and accounting practices, and of course, the rating agencies. The authors explain the steps the government has taken to address the crisis thus far, arguing that we have yet to address the larger issues.

  • Offers a comprehensive examination of the mortgage market meltdown and its reverberations throughout the financial sector and the real economy
  • Explores several important issues that policymakers must address in any future reshaping of financial market regulations
  • Addresses how we can begin to move forward and prevent similar crises from shaking the foundations of our financial system

The Rise and Fall of the U.S. Mortgage and Credit Markets analyzes the factors that should drive reform and explores the issues that policymakers must confront in any future reshaping of financial market regulations.

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Table of Contents

List of Illustrations.

List of Tables.


Chapter 1 Overleveraged, from Main Street to Wall Street.

Chapter 2 Overview of the Housing and Mortgage Markets.

Housing Units, Mortgage Debt, and Household Wealth.

Types of Home Mortgages.

Two Housing Finance Models: Originate-to-Hold vs. Originate-to-Distribute.

Low Interest Rates Contribute to Credit Boom and Record Homeownership Rates.

Mortgage Originations, Home Prices, and Sales Skyrocket.

Chapter 3 Buildup and Meltdown of the Mortgage and Credit Markets.

What Is a Subprime Mortgage and Who Is a Subprime Borrower?

Subprime Lending Grows Rapidly and New Products Gain Acceptance.

Subprime Mortgages Enable More Widespread Homeownership.

Securitization Facilitates the Funding of Subprime Mortgages.

The Housing Bubble Reaches the Breaking Point.

The Collapse Begins.

Chapter 4 When Will the Crisis End?

What Is the Damage Scorecard to Date?

The Pain Spreads throughout the Financial Sector and Beyond.

When Will We Hit Bottom?

Chapter 5 What Went Wrong . . . ?

. . . with Origination Practices and New Financial Products?

. . . with Securitization and Rating Agencies?

. . . with Leverage and Accounting Practices?

. . . with Fannie Mae and Freddie Mac?

. . . with Tax Benefits for Homeownership?

. . . with Regulation and Supervision?

. . . with the Greed Factor?

Assessing the Role of Various Factors to Explain Foreclosures.

Chapter 6 So Far, Only Piecemeal Fixes.

The Landscape Shifts for Lenders.

The Federal Reserve Intervenes to Provide Liquidity and Higher-Quality Collateral.

Congress and the White House Take Steps to Contain the Damage.

The FDIC Takes Steps to Instill Greater Confidence in Depository Institutions.

The Government’s Actions Drive up the Deficit.

Chapter 7 Where Should We Go from Here?

Key Factors That Should Drive Reform.

Issues for Policymakers.

Concluding Thoughts.





About the Milken Institute and General Disclaimer.

About the Authors.


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Author Information

James R. Barth is a Senior Fellow at the Milken Institute and the Lowder Eminent Scholar in Finance at Auburn University. His research focuses on financial institutions and capital markets, both domestic and global, with special emphasis on regulatory issues. Barth was an appointee of Presidents Ronald Reagan and George H.W. Bush as chief economist of the Federal Home Loan Bank Board and later of the Office of Thrift Supervision. He has authored more than 200 articles in professional journals and has written and edited several books, including The Great Savings and Loan Debacle, The Reform of Federal Deposit Insurance, and Rethinking Bank Regulation: Till Angels Govern. Barth has been quoted in publications ranging from the New York Times to the Wall Street Journal and has appeared on broadcast programs including The McNeil/Lehrer NewsHour, Good Morning America, Moneyline, and CNBC's Closing Bell.
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