The Federal National Mortgage Association, commonly known as Fannie Mae, was created by the U.S. congress in 1938, in order to maintain liquidity and stability in the domestic mortgage market. The company is a government-sponsored enterprise (GSE), meaning that while it was a publicly traded company for most of its history, it was still supported by the federal government. While there is no legally binding guarantee of shares in GSEs or their securities, it is generally acknowledged that the U.S. government is highly unlikely to let these enterprises fail. Due to these implicit guarantees, GSEs are able to access financing at a reduced cost of interest. Fannie Mae's main activity is the purchasing of mortgage loans from their originators (banks, mortgage brokers etc.) and packaging them into mortgage-backed securities (MBS) in order to ease the access of U.S. homebuyers to housing credit. The early 2000s U.S. mortgage finance boom During the early 2000s, Fannie Mae was swept up in the U.S. housing boom which eventually led to the financial crisis of 2007-2008. The association's stated goal of increasing access of lower income families to housing finance coalesced with the interests of private mortgage lenders and Wall Street investment banks, who had become heavily reliant on the housing market to drive profits. Private lenders had begun to offer riskier mortgage loans in the early 2000s due to low interest rates in the wake of the "Dot Com" crash and their need to maintain profits through increasing the volume of loans on their books. The securitized products created by these private lenders did not maintain the standards which had traditionally been upheld by GSEs. Due to their market share being eaten into by private firms, however, the GSEs involved in the mortgage markets began to also lower their standards, resulting in a 'race to the bottom'. The fall of Fannie Mae The lowering of lending standards was a key factor in creating the housing bubble, as mortgages were now being offered to borrowers with little or no ability to repay the loans. Combined with fraudulent practices from credit ratings agencies, who rated the junk securities created from these mortgage loans as being of the highest standard, this led directly to the financial panic that erupted on Wall Street beginning in 2007. As the U.S. economy slowed down in 2006, mortgage delinquency rates began to spike. Fannie Mae's losses in the mortgage security market in 2006 and 2007, along with the losses of the related GSE 'Freddie Mac', had caused its share value to plummet, stoking fears that it may collapse. On September 7th 2008, Fannie Mae was taken into government conservatorship along with Freddie Mac, with their stocks being delisted from stock exchanges in 2010. This act was seen as an unprecedented direct intervention into the economy by the U.S. government, and a symbol of how far the U.S. housing market had fallen.

This paper utilizes data on subjective probabilities to study the impact of the stock market crash of 2008 on households' expectations about the returns on the stock market index. We use data from the Health and Retirement Study that was fielded in February 2008 through February 2009. The effect of the crash is identified from the date of the interview, which is shown to be exogenous to previous stock market expectations. We estimate the effect of the crash on the population average of expected returns, the population average of the uncertainty about returns (subjective standard deviation), and the cross-sectional heterogeneity in expected returns (disagreement). We show estimates from simple reduced-form regressions on probability answers as well as from a more structural model that focuses on the parameters of interest and separates survey noise from relevant heterogeneity. We find a temporary increase in the population average of expectations and uncertainty right after the crash. The effect on cross-sectional heterogeneity is more significant and longer lasting, which implies substantial long-term increase in disagreement. The increase in disagreement is larger among the stockholders, the more informed, and those with higher cognitive capacity, and disagreement co-moves with trading volume and volatility in the market.

In 2023, about 21.6 billion U.S. dollars' worth of commercial mortgage-based securities (CMBS) originations were issued in the United States. These are fixed income investment products which are backed by mortgages on commercial properties. The value of originations peaked in 2007 before the financial crisis at 241 billion U.S. dollars. Commercial mortgage delinquencies increased during the COVID-19 pandemic, especially in the hotel and retail sectors.

The foreclosure rate in the United States has experienced significant fluctuations over the past two decades, reaching its peak in 2010 at 2.23 percent following the financial crisis. Since then, the rate has steadily declined, with a notable drop to 0.11 percent in 2021 due to government interventions during the COVID-19 pandemic. In 2024, the rate stood slightly higher at 0.23 percent but remained well below historical averages, indicating a relatively stable housing market. Impact of economic conditions on foreclosures The foreclosure rate is closely tied to broader economic trends and housing market conditions. During the aftermath of the 2008 financial crisis, the share of non-performing mortgage loans climbed significantly, with loans 90 to 180 days past due reaching 4.6 percent. Since then, the share of seriously delinquent loans has dropped notably, demonstrating a substantial improvement in mortgage performance. Among other things, the improved mortgage performance has to do with changes in the mortgage approval process. Homebuyers are subject to much stricter lending standards, such as higher credit score requirements. These changes ensure that borrowers can meet their payment obligations and are at a lower risk of defaulting and losing their home. Challenges for potential homebuyers Despite the low foreclosure rates, potential homebuyers face significant challenges in the current market. Homebuyer sentiment worsened substantially in 2021 and remained low across all age groups through 2024, with the 45 to 64 age group expressing the most negative outlook. Factors contributing to this sentiment include high housing costs and various financial obligations. For instance, in 2023, 52 percent of non-homeowners reported that student loan expenses hindered their ability to save for a down payment.

The year 2021 saw the peak in issuance of residential mortgage backed securities (MBS), at 3.7 trillion U.S. dollars. Since then, MBS issuance has slowed, reaching 1.1 trillion U.S. dollars in 2023. What are mortgage backed securities? A mortgage backed security is a financial instrument in which a group of mortgages are bundled together and sold to the investors. The idea is that the risk of these individual mortgages is pooled when they are packaged together. This is a sound investment policy, unless the foreclosure rate increases significantly in a short amount of time. Mortgage risk Since mortgages are loans backed by an asset, the house, the risk is often considered relatively low. However, the loan maturities are very long, sometimes decades, meaning lenders must factor in the risk of a shift in the economic climate. As such, interest rates on longer mortgages tend to be higher than on shorter loans. The ten-year treasury yield influences these rates, since it is a long-term rate that most investors accept as risk-free. Additionally, a drop in the value of homeowner equity could lead to a situation where the debtor is “underwater” and owes more than the home is worth.

This study examines the market return spillovers from the US market to 10 Asia-Pacific stock markets, accounting for approximately 91 per cent of the region’s GDP from 1991 to 2022. Our findings indicate an increased return spillover from the US stock market to the Asia-Pacific stock market over time, particularly after major global events such as the 1997 Asian and the 2008 global financial crises, the 2015 China stock market crash, and the COVID-19 pandemic. The 2008 global financial crisis had the most substantial impact on these events. In addition, the findings also indicate that US economic policy uncertainty and US geopolitical risk significantly affect spillovers from the US to the Asia-Pacific markets. In contrast, the geopolitical risk of Asia-Pacific countries reduces these spillovers. The study also highlights the significant impact of information and communication technologies (ICT) on these spillovers. Given the increasing integration of global financial markets, the findings of this research are expected to provide valuable policy implications for investors and policymakers.

The aim of this study is to determine whether the stock indices of some developed and developing countries react similarly to the price movements in the Dow Jones Industrial Average (DJIA). In this study, the impact of DJIA on other indices during the 2008 global financial crisis, was explored by using the Vector Error Correction Model. The data used was analyzed in two periods: (1) the expansionary period; and (2) the contractionary period of the FED's policies. The results of the analysis indicate that the developed and emerging stock markets react differently to the DJIA. The results include important findings for decisions by financial investors and policy makers.

The Long Depression was, by a large margin, the longest-lasting recession in U.S. history. It began in the U.S. with the Panic of 1873, and lasted for over five years. This depression was the largest in a series of recessions at the turn of the 20th century, which proved to be a period of overall stagnation as the U.S. financial markets failed to keep pace with industrialization and changes in monetary policy. Great Depression The Great Depression, however, is widely considered to have been the most severe recession in U.S. history. Following the Wall Street Crash in 1929, the country's economy collapsed, wages fell and a quarter of the workforce was unemployed. It would take almost four years for recovery to begin. Additionally, U.S. expansion and integration in international markets allowed the depression to become a global event, which became a major catalyst in the build up to the Second World War. Decreasing severity When comparing recessions before and after the Great Depression, they have generally become shorter and less frequent over time. Only three recessions in the latter period have lasted more than one year. Additionally, while there were 12 recessions between 1880 and 1920, there were only six recessions between 1980 and 2020. The most severe recession in recent years was the financial crisis of 2007 (known as the Great Recession), where irresponsible lending policies and lack of government regulation allowed for a property bubble to develop and become detached from the economy over time, this eventually became untenable and the bubble burst. Although the causes of both the Great Depression and Great Recession were similar in many aspects, economists have been able to use historical evidence to try and predict, prevent, or limit the impact of future recessions.

Abstract of associated article: This paper analyzes the effects of the Commodity Futures Trading Commission's (CFTC) announcements on the stock returns of oil and gas companies around the financial crisis of 2008. Using event study methodology and regression analyses, we examine a set of 122 oil and gas related stocks listed in the New York Stock Exchange (NYSE) for 35 announcements. Our results indicate that CFTC announcements, depending on their content, can affect the stock returns of oil and gas companies. In particular, this is found to hold true during the period of high-volatility in oil prices, i.e., the period following Lehman Brothers failure. During this period, oil and gas related stock returns respond positively to most regulatory announcements, showing that the CFTC's regulatory interventions are perceived positively by the stock market.

We performed a comprehensive time series segmentation study on the 36 Nikkei Jap anese industry indices from 1 January 1996 to 11 June 2010. From the temporal distributions of the clustered segments, we found that the Japanese economy never fully recovered from the extended 1997–2003 crisis, and responded to the most recent global financial crisis in five stages. Of these, the second and main stage affecting 21 industries lasted only 27 days, in contrast to the two-and-a-half-years across-the-board recovery from the 1997–2003 financial crisis. We constructed the minimum spanning trees (MSTs) to visualize the Pearson cross correlations between Japanese industries over five macroeconomic periods: (i) 1997–1999 (Asian Financial Crisis), (ii) 2000–2002 (Technology Bubble Crisis), (iii) 2003–2006 (economic growth), (iv) 2007–2008 (Subprime Crisis), and (iv) 2008–2010 (Lehman Brothers Crisis). In these MSTs, the Chemicals and Electric Machinery industries are consistently hubs. Finally, we present evidence from the segment-to-segment MSTs for flights to quality within the Japanese stock market.

Graph and download economic data for Dates of U.S. recessions as inferred by GDP-based recession indicator (JHDUSRGDPBR) from Q4 1967 to Q3 2024 about recession indicators, GDP, and USA.

The growing trend of interdependence between the international stock markets indicated the amalgamation of risk across borders that plays a significant role in portfolio diversification by selecting different assets from the financial markets and is also helpful for making extensive economic policy for the economies. By applying different methodologies, this study undertakes the volatility analysis of the emerging and OECD economies and analyzes the co-movement pattern between them. Moreover, with that motive, using the wavelet approach, we provide strong evidence of the short and long-run risk transfer over different time domains from Malaysia to its trading partners. Our findings show that during the Asian financial crisis (1997–98), Malaysia had short- and long-term relationships with China, Germany, Japan, Singapore, the UK, and Indonesia due to both high and low-frequency domains. Meanwhile, after the Global financial crisis (2008–09), it is being observed that Malaysia has long-term and short-term synchronization with emerging (China, India, Indonesia), OECD (Germany, France, USA, UK, Japan, Singapore) stock markets but Pakistan has the low level of co-movement with Malaysian stock market during the global financial crisis (2008–09). Moreover, it is being seen that Malaysia has short-term at both high and low-frequency co-movement with all the emerging and OECD economies except Japan, Singapore, and Indonesia during the COVID-19 period (2020–21). Japan, Singapore, and Indonesia have long-term synchronization relationships with the Malaysian stock market at high and low frequencies during COVID-19. While in a leading-lagging relationship, Malaysia’s stock market risk has both leading and lagging behavior with its trading partners’ stock market risk in the selected period; this behavior changes based on the different trade and investment flow factors. Moreover, DCC-GARCH findings shows that Malaysian market has both short term and long-term synchronization with trading partners except USA. Conspicuously, the integration pattern seems that the cooperation development between stock markets matters rather than the regional proximity in driving the cointegration. The study findings have significant implications for investors, governments, and policymakers around the globe.

The history of US oil prices is a complex and dynamic one, influenced by a variety of factors such as geopolitical events, economic conditions, and technological advancements. This article explores the significant periods in US oil price history, including the 1970s oil crisis and the early 2000s price spike. It also discusses the impact of the 2008 global financial crisis and the recent COVID-19 pandemic on oil prices. Overall, the article highlights the interconnectedness of the global economy and the vol

At the onset of the 2008-2009 global economic crisis, the Open Society Institute-Sofia and the World Bank partnered to implement Crisis Monitoring Survey (CMS). The CMS is a multi-topic household survey that followed three nationally representative cross-sections of about 2,400 households, including a panel of about 1,700 Bulgarian households, during February 2010, October 2010 and February 2011. The survey tracked the incidence of income shocks, the coping strategies used by affected households to mitigate the income losses, and the impact of public polices social protection in particular in alleviating the effects of the crisis. In particular, the survey investigated in some depth how households used the labor market to mitigate the impact of the crisis, whether formal social protection programs protected households against sliding into poverty, and the effectiveness of informal safety nets. Given the special need to study the more vulnerable ethnic minority Roma population, an independent "booster sample" of about 300 households was selected in settlements and neighborhoods identified as predominantly Roma. The second round of Crisis Monitoring Survey was conducted in October 2010. The data from this round is documented here.

Granger causality test for emerging and OECD economy at various frequencies.

Financial markets might seem to be a subject matter appropriate only for economists, or perhaps also for behavioural finance specialists, who draw upon psychology to analyze matters such as investors alleged irrational biases. The proposed Fellowship, however, is intended to develop broader social-science, especially sociological, research on financial markets. Thus one research question to be addressed emerges from work in the social studies of science by Michel Callon and also the applicant. Has financial economics achieved its undoubted successes because it accurately described pre-existing realities? Or has it succeeded in part because it changed how markets were organized and how participants in them behaved? Has financial economics, in Callons terms, been performative? (A performative utterance is one that makes itself true, as when as absolute monarch designates someone an outlaw). A second area of work will be on the derivatives (eg options) exchanges that have emerged worldwide since the early 1970s. What accounts for international differences in the form they have taken and in their success? For example, are cultural matters important, for instance the contrast between Chicagos roughneck trading culture and the tradition of English gentlemanly capitalism? A third research question concerns possible instances in which finance theory has been counterperformative (ie in which its application may have undermined its empirical accuracy). The most prominent alleged such instance was the global stock market crash of 1987, which accordingly will be examined in detail. A fourth topic of research is arbitrage (trading that exploits price discrepancies), which is the key mechanism driving prices towards their theoretical values. Are there social aspects to arbitrage? For example, do arbitrageurs sometimes imitate each other, and, if so, with what consequences? A fifth research question is exploratory. Scandals such as Enron and WorldCom have shown that key market numbers such as corporate profits are not self-evident facts, but the outcome of complex processes of construction. To what extent can such processes of construction, the impact on them of the scandals and of regulatory and other changes, and similar matters be examined empirically? An important aspect of the Fellowship will be to encourage broader UK social-science on the financial markets. Several disciplines have much to contribute: for example, politics, with its emphasis on the governance of markets; anthropology, with its fine-grained ethnographic studies; human geography, with its emphasis on the continuing role of particular places in apparently globalized finance. A publicly-accessible database of existing UK work of this kind will be created, and leading scholars, newcomers, financial-market policy-makers and practitioners will be brought together in networking workshops

This paper examines the impact of environmental management system (EMS) certification, a significant voluntary participatory environmental regulation, on the risk of stock price collapse. The study is based on sample data of heavily polluting listed companies from 2008–2020. The study demonstrates that certification of environmental management systems has a significant impact on preventing share price collapse. This finding remains consistent even after controlling for endogeneity and conducting robustness tests. The analysis also reveals that the inhibitory effect of EMS certification is more pronounced for state-owned enterprises and firms with a higher degree of marketisation. Exploring the mechanism of its influence, it is found that environmental management system certification mainly suppresses the risk of stock price collapse by improving the environmental performance of enterprises and the transparency of corporate information, suggesting that environmental management system certification can be used as both an "environmental governance tool" for suppressing stock price collapse and an "information transfer tool" for improving the transparency of corporate information, thus suppressing the risk of stock price collapse. Meanwhile, the media’s attention has been found to moderate the effect of environmental management system certification on stock price crash risk. These findings validate the inhibitory effect of environmental management system certification on stock price crash risk, expand our understanding of the economic consequences of environmental management system certification and the factors that influence stock price crash risk. They also provide a theoretical basis and practical support for environmental regulators.

Formaat: MP4
Omvang: 47,2 Mb
27 February 2008

Online beschikbaar: [01-12-2014]
Standard Youtube License
Uploaded on Jun 11, 2008
Video summary of the ALDE workshop "The International Financial Crisis: Its causes and what to do about it?"

Event date: 27/02/08 14:00 to 18:00
Location: Room ASP 5G2, European Parliament, Brussels
This workshop will bring together Members of the European Parliament, economists, academics and journalists as well as representatives of the European Commission to discuss the lessons that have to be drawn from the recent financial crisis caused by the US sub-prime mortgage market.

With the view of the informal ECOFIN meeting in April which will look at the financial sector supervision and crisis management mechanisms, this workshop aims at debating a wide range of topics including:
- how to improve the existing supervisory framework,
- how to combat the opacity of financial markets and improve transparency requirements,
- how to address the rating agencies' performance and conflict of interest,
- what regulatory lessons are to be learnt in order to avoid a repetition of the sub-prime and the resulting credit crunch.

PROGRAMME

14:00 - 14:10 Opening remarks: Graham Watson, leader of the of the ALDE Group
14:10 - 14:25 Keynote speech by Charlie McCreevy, Commissioner for the Internal Market and Services, European Commission
14:25 - 14:40 Presentation by Daniel Daianu, MEP (ALDE) of his background paper
14:40 - 15:30 Panel I: Current features of the financial systems and the main causes of the current international crisis.

-John Purvis, MEP EPP
-Eric De Keuleneer, Solvay Business School, Free University of Brussels
-Nigel Phipps, Head of European Regulatory Affairs Moody's
-Wolfgang Munchau, journalist Financial Times
-Robert Priester, European Banking Federation (EBF), Head of Department Banking Supervision and Financial Markets
-Ray Kinsella, Director of the Centre for Insurance Studies University College Dublin
-Servaas Deroose, Director ECFIN.C, Macroeconomy of the euro area and the EU, European Commission
-Leke Van den Burg, MEP PSE
-David Smith, Visiting Professor at Derby Business School

This study investigates the dynamic and asymmetric propagation of return spillovers between sectoral commodities and industry stock markets in China. Using a daily dataset from February 2007 to July 2022, we employ a time-varying vector autoregressive (TVP-VAR) model to examine the asymmetric return spillovers and dynamic connectedness across sectors. The results reveal significant time-varying spillovers among these sectors, with the industry stocks acting as the primary transmitter of information to the commodity market. Materials, energy, and industrials stock sectors contribute significantly to these spillovers due to their close ties to commodity production and processing. The study also identifies significant asymmetric spillovers with bad returns dominating, influenced by major economic and political events such as the 2008 global financial crisis, the 2015 Chinese stock market crisis, the COVID-19 pandemic, and the Russia-Ukraine war. Furthermore, our study highlights the unique dynamics within the Chinese market, where net information spillovers from the stock market to commodities drive the financialization process, which differs from the bidirectional commodity financialization observed in other markets. Finally, portfolio analysis reveals that the minimum connectedness portfolio outperforms other approaches and effectively reflects asymmetries. Understanding these dynamics and sectoral heterogeneities has important implications for risk management, policy development, and trading practices.

This dataset accompanies the article: Hoyer, K., Zeisberger, S., Breugelmans, S. M., & Zeelenberg, M. (2021). Greed and individual trading behavior in experimental asset markets. Decision, 8(2), 80. Article abstract: Greed has been shown to be an important economic motive. Both the popular press as well as scientific articles have mentioned questionable practices by greedy bankers and investors as one of the root causes of the 2008 global financial crisis. In spite of these suggestions, there is as of yet no substantive empirical evidence for a contribution of greed to individual trading behavior. This article presents the result of 15 experimental asset markets in which we test the influence of greed on trading behavior. We do not find empirical support for the idea that greedier investors trade fundamentally differently from their less greedy counterparts in markets. These findings shed light on the role of greed in trading and the emergence of asset market bubbles in specific, and of the financial crisis in general. Directions for future research are discussed.