"compare the crisis in the US banking system -- and in the shadow banking system, which turned out to be rather linked to the real banking system -- triggered by the subprime crisis to other recent crises in advanced economies. They find "stunning qualitative and quantitative parallels across a number of standard financial crisis indicators.""Calculated Risk today has a good piece titled "Cuomo: Due Diligence and Disclosure" which discusses how the securitization system for issuing home loans AKA the shadow banking system, has led to the misallocation of capital that Setser is describing.
Sunday, January 13, 2008
Root cause of financial crisis of 2007
Brad Setser pegs it very succinctly as follows: "the recent mis-allocation of global savings into US real estate." He says this in the context of a piece on two researchers who