The Incentives Leading up to the 2008 Financial Crisis
International Journal of Trade and Global Markets Vol. 4, No. 4, October 2011
Kurt W. Rotthoff, Ph.D. Department of Economics and Legal Studies
There are many events that led up to the financial crisis of 2008. This study looks at the political policies in place before the crisis happened. Focusing on the decade and a half prior to the crisis, the incentives in the financial industry led to risk mitigation. This response to mitigate risk explains, at least in part, a reason why there was a boom in the CDO (Collateralized Debt Obligations) and MBS (Mortgage-Backed Securities) markets in the years leading up to the crisis.