Residential Mortgage Loan to Support Security – “Angel” or “Devil”?
Supervising Professors: Ouyang Hui, Li Xuenan; Case Researcher: Yang Yan [ Language available : Chinese ]

In 2008, the global economic crisis that swept the world, the once-marketed “mortgage-backed securities” (MBS) and related derivatives became targets of public scorn. These positive tools of risk were overnight renamed lethal weapons of systemic disaster. Banks including Lehman Brothers, Bear Stearns, Merrill Lynch, and AIG fell, went bankrupt, were acquired, or were “nationalized.” However, MBS as an asset securitization financial product has brought more liquidity, greater mobility and much economic vitality to financial market. How did it turn out so badly and how can a crisis like this sweep the world? What roles did US state institutions and private players have in the derivative crisis? What is the moral of the story for China, now tackling its own financial reforms?

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