Unravelling the Credit Crunch

Introduction

What Happened?

U.S. Residential Property: The Crunch Begins

Old- and New-Style Banking

What Happened in the Markets: The Second Stage

Après Lehman le Déluge: The Third Stage

Understanding the Slime: U.S. Residential Mortgages

Mortgage Structures and Borrowers

How Mortgages Were Made

Mortgage Lending during the Greenspan Boom

A Story of the ODM: Countrywide Financial

Financial Assets and Their Prices

Securities

Markets and Prices

The Liquidity of Financial Assets

What’s in It for Me?

Liquidity and Central Banks

The Basis of Old-Style Banking

Liability Liquidity

Central Banks

Central Bank Policy in a Crunch

A Tale of Two Central Banks

A Twenty-First Century Run: Northern Rock

The Crash of 1929 and Its Legacy

The Crash of 1929 and the Great Depression

Political Reactions

The New Deal

The RFC and Other Rescuers

The Evolution of Freddie and Fannie

Securitization, Tranching, and Financial Modeling

Securitization

The Securitization of Subprime Mortgages

Models and Hedging

Model Risk

Where Did It All Go Wrong?

The Write-downs

The Legacy Fails: Fannie, Freddie, and the Broker/Dealers in 2008

The Growth, Distress, and Rescue of Fannie Mae and Freddie Mac

Financial Services Modernization in the 1990s

The End of the Broker/Dealer

Lessons from the Failure of the Broker/Dealer Model

Compensating Controls

Structured Finance

Credit Derivatives

ABS in Structured Finance

Structured Finance in the Boom Years

Insurance in Form and Name

The Rescue of AIG

Off Balance Sheet Funding

Municipal Finance and the Monolines

Municipal Finance

The Monolines Do Structured Finance

Insurers and Finance: A Toxic Mix?

Auction Rate Securities

The Rules of the Game: Accounting and Regulation

Accounting and Why It Matters

Regulation and Regulatory Capital

The Consequences of Basel 2

Regulation away from Basel

Understanding Earnings

Japan’s Lost Decade

A Comparative Anatomy of Financial Crises

Changes and Consequences

Transmission

The Provision of Credit to the Broad Economy

What Worked and What Didn’t

Central Banks, Regulators, and Accountants

Experimental Finance

The Financial System from 2009

Index