Great blog post by @csissoko about the terms of the bail-out in the US, explaining in detail the extent of government intervention in capital, purchases and guarantees to save the banks and their bad assets and how that implied real losses as not everything was repaid. 1/4..
Homeowners also lost heavily, as a 1977 US Law excluded mortgages from the debt restructuring in personal bankruptcy and until 2012 no effective debt reduction program for persons existed. Reports say that around 5 million homes were foreclosed during the crisis years. 2/4.
This should draw attention for the flawed housing finance process. This paper frbsf.org/economic-resea… … shows how in the 17 advanced economis, mortgages in banks were only 25% of GDP in 1980 but grew to 70% in 2010. Long term loans funded by short term liabilities ... 3/4
The 3 authors show also how mortgage credit shape the business cycle, create instability and crises. Many reforms have been proposed e.g. by Goodhart or Mian and Sufi (a different NSFR or hybrid debt/equity contracts) but nothing on this has changed. It´s still a system flaw 4/4
