Financial Crisis. The Liquidity Crunch of August 2007

摘要

Financial markets suffered significant disruption in August 2007. Certain financial instruments, especially mortgage-backed collateralized debt obligations (CDOs), became illiquid, that is, they became difficult to sell at any price. Liquidity problems then spread across other credit markets as investors feared that losses linked to housing securities might affect a broad range of market participants. There was a flight to quality as investors shifted funds into the least risky securities, such as U.S. Treasury securities. As a result, many types of corporate and financial borrowers--even some with few or no links to mortgage markets--had trouble obtaining credit, whether to fund new projects or transactions, or to refinance existing debt. The stock market experienced unusual volatility, although the Dow Jones Industrial Average actually gained 156 points during August. The financial volatility observed in August is particularly significant because it illustrates how stress in one financial market--in this case, housing--may spread to other markets, causing losses to investors and intermediaries not directly involved in the market where the trouble originated.