MORTGAGE-BACKED SECURITIES FINANCIAL CRISIS 2008

Abstract

Our purpose behind writing this paper was to carry out a more in-depth analysis of the US mortgagebacked securities market and the part it played in the financial meltdown of 2008. To this end we set about researching first the basics as to what the mortgage-backed securities were exactly and tried gaining a deeper understanding of all the derivatives that have come into existence over the past 20 years. From there we set out to gather some historical information about the MBS industry in general and more specifically the US market so as to analyze the meltdown in a more holistic way. Our paper goes on to detail the financial crisis, i.e. its cause and its impacts, and then takes a look at the MBS market in the post-crisis era. Not only have we sought to recount all the measure that the US government has taken to counter the situation and all the restrictions that have been placed on the MBS market but we have also attempted to analyze the situation from the point of view of undergraduate students. Therefore, we have ended the report with our own commentary as to whether or not the measures taken have been enough to overcome the effects of the crisis. The commentary is accompanied by some policy recommendations that we thought would produce the desired outcomes if implemented.