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http://timeline.stlouisfed.org/index.cfm?p=timeline
One observation I noticed was how obvious some of the early warning signs seem now. From the timeline (some entries removed to make my point clearer):
"April 2, 2007 | SEC Filing
New Century Financial Corporation, a leading subprime mortgage lender, files for Chapter 11 bankruptcy protection.
June 1, 2007 | Congressional Testimony
Standard and Poor’s and Moody’s Investor Services downgrade over 100 bonds backed by second-lien subprime mortgages.
June 7, 2007
Bear Stearns informs investors that it is suspending redemptions from its High-Grade Structured Credit Strategies Enhanced Leverage Fund.
July 11, 2007 | Standard and Poor’s Ratings Direct
Standard and Poor’s places 612 securities backed by subprime residential mortgages on a credit watch.
July 24, 2007 | SEC Filing
Countrywide Financial Corporation warns of “difficult conditions.”
July 31, 2007 | U.S. Bankruptcy Filing
Bear Stearns liquidates two hedge funds that invested in various types of mortgage-backed securities."
Wow! How could we (or more importantly, the people who work in finance / government) have missed this?Looking at this timeline, I was also surprised by how early it starts (Feb. 2007!). My question for all of you is, when did you realize we were going though a financial crisis? Was there a specific event that in your memory was the beginning of the crisis? For me, the collapse of Bear Stearns was when I really started to be aware of the crisis.
http://timeline.stlouisfed.org/index.cfm?p=timeline
I guess to answer your question the time I really thought of it as a crisis was when the housing bubble burst. However, I didn't think it would get this bad as far as bailing out the banks and now car companies. I always thought that we would bounce back until I saw the stock market crash. I feel like I was really ignorant to it all, and I still feel like the majority of Americans are ignorant today unless they are directly affected by it.
ReplyDeleteAs I have mentioned in some of my classes, I knew that a problem existed for Kalamazoo's local governments in November 2007 because of the spike in bank foreclosures (delinquent mortgages) and tax foreclosures (delinquent local taxes). I helped to bring together a bunch of local agencies to work on foreclosure mitigation and through that work realized how overwhelming the foreclosure problem was. I didn't realize how bad it was outside of the housing markets until September 2008.
ReplyDeleteOddly enough I remember talking with my grandfather (former VP of Finance for Ford Motor Company) about housing prices in 2005 and he told me there was a big bubble and that people just ought to stay away. He looked pretty dumb for a couple years but I thought he was right and as soon as housing prices began decreasing I thought something bad might happen. I didn't understand how bad it would get but I knew the tech bubble in the early 2000s was bad. That was basically my first conception until I learned about sub-prime mortgages in mid 2007. When Indy Mac failed because of a bank run I knew something REALLY big was as I had thought we couldn't even have those in a post-depression world.
ReplyDelete--Tommy Turner
Before the housing bubble burst, the fed kept lowering the rate to create some sort of economic stimulus which was an indicator that our economy was heading towards recession. But Id have to agree with Matt that the collapse of the large wall street firms was when It really became apparent that a our financial system was taking a plunge.
ReplyDeleteI guess I would say that I was pretty ignorant to the situation. I find that I'll watch sportscenter more than the news and until the crisis happened that was the situation. I was well aware of the housing bubble bursting and I really wasn't concerned until the stock market crashed. Honestly, once the financial crisis occured I began taking a larger interest in the situation as most people did and that's when most of my learning took place. Being more business oriented, I payed closer attention to companies like AIG and their use of the credit default swaps. I became very interested in all the different financial tools that firms were 'irresponsibly' using. Now when I look at it there are a large number of factors that could and did play into the crisis but I wonder, if one of them had not occured, such as the housing bubble bursting, would we still have had a financial crisis or would it just have been stalled further into the future?
ReplyDeleteJust as Bryan said I was also pretty ignorant to the whole financial crisis. I knew the economy wasn't doing that great but I kept telling myself that we are the United States and we'll be fine and bounce back in no time. I finally realized that we were a lot worse off than I thought was when I was on study abroad. The dollar was not really worth anything and not really respected at the time. The exchange rate for the Euro was astronomical and reached a point where $2 equaled 1 euro. Then I finally realized maybe the US economy was not doing well and we are actually in recession.
ReplyDeleteAlong with Jared's comments, I also was very ignorant to the ongoing financial crisis in its early stages. While I was in Europe in the spring of 2008 the worthless dollar did signal the fact that the economy was struggling to me. I just never figured it was going to almost completely collapse in the coming months.
ReplyDelete