The 1990’s marked a period of prolonged economic boom for the United States. (Brunnermeier, 2009, 77-100) Interest rates were low, which increased investments in subprime mortgage loans- made possible through the mechanism of securitisation. The “U.S. housing bubble” grew as inflows of hot money from domestic and overseas investment funds poured into the U.S housing market, which is arguably the main mechanism by which the crisis spread. The inevitable collapse of the housing bubble as those securities commenced in decreasing value, banks in the U.S. and in foreign countries began to fail. The total cost incurred by the global financial crisis is estimated by the International Monetary Fund (IMF) at $11.9 trillion, while estimates of global bank losses currently stand at $3.4 trillion. (Evans, Jones and Steven. 2009) It was these failures which spurred systemic banking crises in many countries around the world. US Congress Oversight Panel report (August 2009), “Troubled assets were at the heart of the crisis that gathered steam during the last several years and erupt...
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