Introduction
What Happened?
U.S. Residential Property: The Crunch Begins
Old- and New-Style Banking
What Happened in the Markets: The Second Stage
Après Lehman le Déluge: The Third Stage
Understanding the Slime: U.S. Residential Mortgages
Mortgage Structures and Borrowers
How Mortgages Were Made
Mortgage Lending during the Greenspan Boom
A Story of the ODM: Countrywide Financial
Financial Assets and Their Prices
Securities
Markets and Prices
The Liquidity of Financial Assets
What’s in It for Me?
Liquidity and Central Banks
The Basis of Old-Style Banking
Liability Liquidity
Central Banks
Central Bank Policy in a Crunch
A Tale of Two Central Banks
A Twenty-First Century Run: Northern Rock
The Crash of 1929 and Its Legacy
The Crash of 1929 and the Great Depression
Political Reactions
The New Deal
The RFC and Other Rescuers
The Evolution of Freddie and Fannie
Securitization, Tranching, and Financial Modeling
Securitization
The Securitization of Subprime Mortgages
Models and Hedging
Model Risk
Where Did It All Go Wrong?
The Write-downs
The Legacy Fails: Fannie, Freddie, and the Broker/Dealers in 2008
The Growth, Distress, and Rescue of Fannie Mae and Freddie Mac
Financial Services Modernization in the 1990s
The End of the Broker/Dealer
Lessons from the Failure of the Broker/Dealer Model
Compensating Controls
Structured Finance
Credit Derivatives
ABS in Structured Finance
Structured Finance in the Boom Years
Insurance in Form and Name
The Rescue of AIG
Off Balance Sheet Funding
Municipal Finance and the Monolines
Municipal Finance
The Monolines Do Structured Finance
Insurers and Finance: A Toxic Mix?
Auction Rate Securities
The Rules of the Game: Accounting and Regulation
Accounting and Why It Matters
Regulation and Regulatory Capital
The Consequences of Basel 2
Regulation away from Basel
Understanding Earnings
Japan’s Lost Decade
A Comparative Anatomy of Financial Crises
Changes and Consequences
Transmission
The Provision of Credit to the Broad Economy
What Worked and What Didn’t
Central Banks, Regulators, and Accountants
Experimental Finance
The Financial System from 2009
Index
Biography
David Murphy is principal of rivast Consulting, a leading London risk management consultancy.
"The crisis is a bafflingly complex phenomenon. This complexity is considerably amplified by the incomprehensible jargon that most experts use to discuss it. This book is the first that I have seen to explain the many different aspects of the crisis in terms that everybody can understand. The coverage is excellent starting with why the crisis started in the housing sector, the role of the Federal Reserve, and so forth. The book also explains securitization, tranching, and many other technical aspects the reader needs to understand what happened. It provides historical context by discussing what happened in the 1930s and the 1990s in Japan. While the U.S. is naturally central, the effect of the crisis on other countries is also discussed. I highly recommend this book to everybody."
—Franklin Allen, Nippon Life Professor of Finance and Economics, The Wharton School of the University of Pennsylvania, Philadelphia, USA
