Markets, Systemic Risk, and the Subprime Mortgage Crisis

Authors

Steven L. Schwarcz, Duke Law SchoolFollow

Document Type

Article

Publication Date

2008

Keywords

systemic risk, subprime mortgages, financial crisis, securities

Abstract

The recent subprime mortgage meltdown is undermining financial market stability and has the potential to cause a true systemic breakdown, collapsing the world's financial systems like a row of dominoes. This essay uses the subprime crisis to demonstrate that existing protections against systemic risk, which focus on banks and largely ignore financial markets, are anachronistic and misguided. Because companies increasingly access financial markets without going through banks, an effective framework for containing systemic risk must focus on markets.

Citation

Steven L. Schwarcz, Markets, Systemic Risk, and the Subprime Mortgage Crisis, 61 SMU Law Review 209-217 (2008)