Advances in Economics and Business Vol. 2(2), pp. 112 - 119
DOI: 10.13189/aeb.2014.020207
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Asset Securitization and Bubbles: An Illustration of Subprime Mortgage Default Crisis


Xiangsheng Dou *, Jing Wang
Center for International Economic Research, School of Public Administration, Southwest Jiaotong University,Jinniu, Chengdu 610031, Sichuan, China

ABSTRACT

The paper intends to explore the cause and mechanism of subprime mortgage credit crisis occurrence in the United States and thereby the financial crisis resulted. The research indicates that, the outbreak of subprime crisis in the United States in 2007 is the result of multiple factors. Among them, the unreasonable securitization of assets, the excessive creation and over-financing of financial assets and the over-expansion of subprime mortgage credits, and the unceasing inflation and final burst of asset bubbles, are root causes. In addition, the relaxation of government regulation as well as the neglect of efficient guidance and control on real estate markets since 2002 has created a favorable external condition for the sustainable expansion of subprime mortgage credits and the rise of housing prices.

KEYWORDS
Assets Securitization, Subprime Mortgage Credits, Asset Bubbles, Subprime Mortgage Default Crisis, Credit Risks

Cite this paper
Xiangsheng Dou , Jing Wang . "Asset Securitization and Bubbles: An Illustration of Subprime Mortgage Default Crisis." Advances in Economics and Business 2.2 (2014) 112 - 119. doi: 10.13189/aeb.2014.020207.