The meltdown of subprime mortgages triggered a financial crisis in 2007 that threatened the world economy and threw many countries into recessions. In response to the economic meltdown, countries issued more debt. As of the fall of 2011, there is speculation that Greece, Portugal, Italy and Spain may default on their debt, which like the subprime crisis, could have a worldwide contagion effect.
We will begin the course by studying how obscure mortgages in the United States triggered financial mayhem, including the roles of market and regulatory structures, and how problems in the mortgage market in the U.S. had (and continue to have) spillover effects around the world. The course will then examine the legal regimes that different countries have adopted to address risky mortgage lending and the financial instruments that mortgage loans back. Throughout, we will examine and critique models for mortgage regulation, including disclosure, suitability, self-regulation, and product screening. We will also review the growing field of behavioral economics and consider whether and how this new field should inform policy.
My goal is for students, by the end of the course, to have a strong understanding of mortgage markets, the regulation of financial services, and the potential for contagion when financial firms go awry.
The only pre-requisite for this course is curiosity and a willingness to participate in class discussions.
Method of Examination: Students will be evaluated on a final take-home examination and class participation.
Home Exam Required
<<Course Updated: April 25, 2012>>