The Political, Regulatory and Market Failures That Caused the US Financial Crisis

Tarr, David G.

dc.creator	Tarr, David G.
dc.date	2012-03-19T18:40:13Z
dc.date	2012-03-19T18:40:13Z
dc.date	2010-05-01
dc.date.accessioned	2023-02-17T21:04:00Z
dc.date.available	2023-02-17T21:04:00Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100527154732
dc.identifier	http://hdl.handle.net/10986/3810
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/244774
dc.description	This paper discusses the key regulatory, market and political failures that led to the 2008-2009 United States financial crisis. While Congress was fixing the Savings and Loan crisis, it failed to give the regulator of Fannie Mae and Freddie Mac normal bank supervisory power. This was a political failure as Congress was appealing to narrow constituencies. In the mid-1990s, to encourage home ownership, the Administration changed enforcement of the Community Reinvestment Act, effectively requiring banks to lower bank mortgage standards to underserved areas. Crucially, the risky mortgage standards then spread to other sectors of the market. Market failure problems ensued as banks, mortgage brokers, securitizers, credit rating agencies, and asset managers were all plagued by problems such as moral hazard or conflicts of interest. The author explains that financial deregulation of the past three decades is unrelated to the financial crisis, and makes several recommendations for regulatory reform.
dc.language	English
dc.relation	Policy Research working paper ; no. WPS 5324
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	ACCESS TO CREDIT
dc.subject	ACCOUNTING
dc.subject	ACCOUNTING STANDARDS
dc.subject	AFFORDABLE HOUSING
dc.subject	ASSET MANAGER
dc.subject	ASSET MANAGERS
dc.subject	ASYMMETRIC INFORMATION
dc.subject	BACKED SECURITIES
dc.subject	BAILOUT
dc.subject	BAILOUTS
dc.subject	BALANCE SHEET
dc.subject	BALANCE SHEETS
dc.subject	BANK HOLDING
dc.subject	BANK LENDING
dc.subject	BANK POLICY
dc.subject	BANK SUPERVISION
dc.subject	BANKING REGULATION
dc.subject	BANKING SUPERVISION
dc.subject	BANKING SYSTEM
dc.subject	BANKRUPTCIES
dc.subject	BANKRUPTCY
dc.subject	BARRIER TO HOMEOWNERSHIP
dc.subject	BASIS POINTS
dc.subject	BOND
dc.subject	BONDHOLDERS
dc.subject	BORROWER
dc.subject	BORROWING
dc.subject	BROKERS
dc.subject	CAPITAL MARKET
dc.subject	CAPITAL MARKETS
dc.subject	CAPITAL REQUIREMENTS
dc.subject	CASH FLOW
dc.subject	CASH FLOWS
dc.subject	CLEARING CORPORATION
dc.subject	COLLATERAL
dc.subject	COLLATERAL POOLS
dc.subject	COLLECTIVE ACTION
dc.subject	COMMERCIAL BANKS
dc.subject	COMMERCIAL LOANS
dc.subject	COMMERCIAL MORTGAGE
dc.subject	COMMUNITY LENDING
dc.subject	COMMUNITY REINVESTMENT
dc.subject	CONFLICT OF INTEREST
dc.subject	CONFLICTS OF INTEREST
dc.subject	CONSUMER EXPENDITURES
dc.subject	CONSUMER LOANS
dc.subject	CONVENTIONAL MORTGAGES
dc.subject	CREDIT DEFAULT
dc.subject	CREDIT DEFAULT SWAP
dc.subject	CREDIT DEFAULT SWAPS
dc.subject	CREDIT HISTORY
dc.subject	CREDIT MARKETS
dc.subject	CREDIT NEEDS
dc.subject	CREDIT OFFICER
dc.subject	CREDIT QUALITY
dc.subject	CREDIT RATING
dc.subject	CREDIT RATING AGENCIES
dc.subject	CREDIT RATINGS
dc.subject	CURRENCY
dc.subject	DEBT
dc.subject	DEBT INSTRUMENT
dc.subject	DEBT OBLIGATIONS
dc.subject	DEBTS
dc.subject	DEDUCTIBLE
dc.subject	DEFAULT RATE
dc.subject	DEFAULTS
dc.subject	DEFICITS
dc.subject	DEPOSIT
dc.subject	DEVELOPING COUNTRIES
dc.subject	DOWN PAYMENT
dc.subject	DOWN PAYMENTS
dc.subject	EFFICIENT MARKET
dc.subject	EXCHANGE COMMISSION
dc.subject	FAIR VALUE
dc.subject	FAIR VALUES
dc.subject	FAMILIES
dc.subject	FEDERAL BUDGET
dc.subject	FEDERAL DEPOSIT INSURANCE
dc.subject	FEDERAL HOUSING
dc.subject	FEDERAL HOUSING ENTERPRISES
dc.subject	FEDERAL INCOME TAX
dc.subject	FEDERAL RESERVE
dc.subject	FEDERAL RESERVE BANK
dc.subject	FINANCIAL CRISES
dc.subject	FINANCIAL CRISIS
dc.subject	FINANCIAL DEREGULATION
dc.subject	FINANCIAL INSTITUTION
dc.subject	FINANCIAL INSTITUTIONS
dc.subject	FINANCIAL INSTRUMENT
dc.subject	FINANCIAL INSTRUMENTS
dc.subject	FINANCIAL MARKET
dc.subject	FINANCIAL MARKET PARTICIPANTS
dc.subject	FINANCIAL MARKETS
dc.subject	FINANCIAL OBLIGATIONS
dc.subject	FINANCIAL REGULATORS
dc.subject	FINANCIAL SAFETY
dc.subject	FINANCIAL SERVICES
dc.subject	FINANCIAL SYSTEM
dc.subject	FIRST TIME HOME BUYERS
dc.subject	FIXED RATE
dc.subject	FRAUD
dc.subject	FREE LOANS
dc.subject	GLOBAL BANKING
dc.subject	GLOBALIZATION
dc.subject	GOVERNMENT GUARANTEES
dc.subject	GOVERNMENT POLICIES
dc.subject	HOLDINGS
dc.subject	HOME BUYERS
dc.subject	HOME EQUITY
dc.subject	HOME EQUITY LOAN
dc.subject	HOME MORTGAGE
dc.subject	HOME MORTGAGES
dc.subject	HOME OWNERSHIP
dc.subject	HOMEOWNER
dc.subject	HOMEOWNERS
dc.subject	HOMEOWNERSHIP
dc.subject	HOUSEHOLDS
dc.subject	HOUSING FINANCE
dc.subject	ILLIQUID MARKETS
dc.subject	IMPLICIT GOVERNMENT GUARANTEE
dc.subject	IMPLICIT GOVERNMENT GUARANTEES
dc.subject	INCOME TAX
dc.subject	INCOME TAXES
dc.subject	INSTRUMENT
dc.subject	INSURANCE COMPANIES
dc.subject	INSURANCE CORPORATION
dc.subject	INTEREST PAYMENTS
dc.subject	INTEREST RATE
dc.subject	INTEREST RATE POLICIES
dc.subject	INTEREST RATE RISK
dc.subject	INTEREST RATES
dc.subject	INTERNATIONAL BANK
dc.subject	INTERNATIONAL FINANCE
dc.subject	INVESTING
dc.subject	INVESTMENT BANKING
dc.subject	INVESTMENT BANKS
dc.subject	INVESTMENT FUNDS
dc.subject	LENDERS
dc.subject	LIQUIDITY
dc.subject	LIQUIDITY CRISIS
dc.subject	LIQUIDITY PROBLEMS
dc.subject	LOAN
dc.subject	LOAN GUARANTEES
dc.subject	LOAN PERFORMANCE
dc.subject	LOW INTEREST RATE
dc.subject	LOW INTEREST RATES
dc.subject	LOW-INCOME FAMILIES
dc.subject	MARK TO MARKET
dc.subject	MARK TO MARKET ACCOUNTING
dc.subject	MARKET FAILURE
dc.subject	MARKET FAILURES
dc.subject	MARKET MAKER
dc.subject	MARKET PARTICIPANTS
dc.subject	MARKET PRICE
dc.subject	MARKET STABILITY
dc.subject	MARKET VALUE
dc.subject	MARKET VALUES
dc.subject	MINIMUM CAPITAL REQUIREMENTS
dc.subject	MONETARY FUND
dc.subject	MONETARY POLICY
dc.subject	MONEY MANAGERS
dc.subject	MONEY SUPPLY
dc.subject	MORAL HAZARD
dc.subject	MORTGAGE
dc.subject	MORTGAGE BROKERS
dc.subject	MORTGAGE INDUSTRY
dc.subject	MORTGAGE INTEREST
dc.subject	MORTGAGE INTEREST RATES
dc.subject	MORTGAGE MARKET
dc.subject	MORTGAGE RATES
dc.subject	MUTUAL FUND
dc.subject	MUTUAL FUNDS
dc.subject	NO CREDIT HISTORY
dc.subject	ORIGINAL CONTRACTS
dc.subject	PENSION
dc.subject	PENSION FUNDS
dc.subject	POLITICAL ECONOMY
dc.subject	PORTFOLIO
dc.subject	PORTFOLIOS
dc.subject	POTENTIAL INVESTORS
dc.subject	PRICE STABILITY
dc.subject	PRINCIPAL-AGENT PROBLEM
dc.subject	PRIVATE BANKS
dc.subject	PRIVATE ENTERPRISES
dc.subject	PRIVATE FINANCIAL INSTITUTIONS
dc.subject	PRIVATE FINANCIAL MARKET
dc.subject	PRUDENTIAL REGULATION
dc.subject	PRUDENTIAL SUPERVISION
dc.subject	PUBLIC FUNDS
dc.subject	PUBLIC POLICY
dc.subject	RATE OF RETURN
dc.subject	RATES OF INTEREST
dc.subject	REGULATORY STANDARDS
dc.subject	REINVESTMENT
dc.subject	RESERVES
dc.subject	RESIDENTIAL MORTGAGES
dc.subject	RETURN
dc.subject	RETURNS
dc.subject	RISKY ASSETS
dc.subject	RISKY LOANS
dc.subject	RISKY SECURITIES
dc.subject	SAFETY NET
dc.subject	SAVINGS
dc.subject	SAVINGS ACCOUNTS
dc.subject	SECONDARY MARKET
dc.subject	SECONDARY MARKETS
dc.subject	SOLVENCY
dc.subject	SOURCE OF INCOME
dc.subject	SUBORDINATED BONDS
dc.subject	SUBORDINATED DEBT
dc.subject	SUPERVISORY AUTHORITY
dc.subject	SUPERVISORY POWER
dc.subject	SUPERVISORY POWERS
dc.subject	TAX
dc.subject	TAX CREDIT
dc.subject	TAX POLICIES
dc.subject	TAX RETURNS
dc.subject	TRADING
dc.subject	TRANCHE
dc.subject	TRANCHES
dc.subject	TREASURY
dc.subject	UNDERLYING MORTGAGE
dc.subject	URBAN AREAS
dc.subject	URBAN DEVELOPMENT
dc.subject	VALUATION
dc.title	The Political, Regulatory and Market Failures That Caused the US Financial Crisis
dc.type	Publications & Research :: Policy Research Working Paper
dc.coverage	North America
dc.coverage	United States