Financial Crisis for Beginners
*There have been a few OP's posted of late in GD-P suggesting bogus
correlations regarding regulations/ state of the economy and the financial crisis.
This is an attempt to allow anyone interested to achieve a more nuanced understanding
of the crisis.
We believe that everyone should be able to understand how the financial crisis came about, what it means for all of us, and what our options are for getting out of it. Unfortunately, the vast majority of all writing about the crisis – including this blog – assumes some familiarity with the world of mortgage-backed securities, collateralized debt obligations, credit default swaps, and so on. You’ve probably heard dozens of journalists use these terms without explaining what they mean. If you’re confused, this page is for you. Over time, we will be adding more explanations and more links to external sources, so check back for updates. (Some of the explanations on this page are simplified and not 100% accurate; their goal is to explain the key concepts to a general audience.)
Articles on this page
Securitization, CDOs, and banking capital
Stock market vs. credit market
Crises of confidence and bank runs
Credit default swaps
Bank recapitalization
De-leveraging (or, where did all the money go?)
Separate posts
Currency crisis
Recession
Federal Reserve
Credit default swaps, herald of doom
Japan’s lost decade
Interest rates
Mark-to-market accounting: This one gets a bit technical, but the first part covers accounting in general and mark-to-market accounting
Risk management and value-at-risk
“Bad banks”
Sweden
Is saving good?
Bank capital, capital adequacy, and tangible common equity
Convertible preferred shares and the Capital Assistance Program
Nationalization
Macroeconomics of the financial crisis
Comparison of different toxic asset plans (by Mark Thoma)
Structured finance: This one presumes a basic understanding of what a CDO is.
Inflation expectations
Financial innovation
GDP growth rates and other economic statistics
Stress tests
Option and warrant pricing
Regulatory capital arbitrage (new 5/30/09)
in full: http://baselinescenario.com/financial-crisis-for-beginners/