Prone to Fail: The Pre-Crisis Financial System

  title={Prone to Fail: The Pre-Crisis Financial System},
  author={Darrell Duffie},
  journal={ERN: Other Monetary Economics: Financial System \& Institutions (Topic)},
  • D. Duffie
  • Published 19 July 2018
  • Economics
  • ERN: Other Monetary Economics: Financial System & Institutions (Topic)
The financial crisis that began in 2007 was triggered by over-leveraged homeowners and a severe downturn in US housing markets. However, a reasonably well-supervised financial system would have been much more resilient to this and other types of severe shocks. Instead, the core of the financial system became a key channel of propagation and magnification of losses suffered in the housing market. Critical financial intermediaries failed, or were bailed out, or dramatically reduced their… 
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