Chairman Ben S. Bernanke At the Dallas Regional Chamber, Dallas, Texas, April 7, 2010, Economic Challenges: Past, Present, and Future
“The financial crisis that began in the summer of 2007 was an extraordinarily complex event with multiple causes. Its immediate trigger was a downturn in the national housing market that followed a long period of rapid construction and rising home prices. The housing slump in turn brought to light some very poor lending practices, especially for subprime mortgages extended to less-creditworthy borrowers. Relative to the global financial system, the market for subprime mortgages was quite small, probably less than 1 percent of global financial assets. How, then, did problems in this market appear to have such widespread consequences? One important reason is that the subprime mortgage market was closely linked to a broader framework for credit provision that came to be known as the shadow banking system. That broader framework, at least as it was structured during the run-up to the crisis, proved deeply flawed.”
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