Setting the Stage
The outbreak of the current financial crisis can be officially fixed as August 2007. That was when the central banks had to intervene to provide liquidity to the banking system. As the BBC reported:1
• On August 6, American Home Mortgage, one of the largest U.S. independent home loan providers, filed for bankruptcy after laying off the majority of its staff. The company said it was a victim of the slump in the U.S. housing market that had caught out many subprime borrowers and lenders.
• On August 9, short-term credit markets froze up after a large French bank, BNP Paribas, suspended three of its investment funds worth 2 billion euros, citing problems in the U.S. subprime mortgage sector. BNP said it could not value the assets ...