Collateral Crises Some Reflections on the Recent Financial Crisis推荐.pdfVIP

19 Collateral Crises G ARY B. G ORTON AN D G U ILLE RMO ORD OÑ E Z * Financial crises are hard to explain without resorting to large shocks. But the recent crisis, for example, was not the result of a large shock. The Financial Crisis Inquiry Commission (FCIC) Report (2011) noted that with respect to subprime mortgages, “Overall, for 2005 to 2007 vintage tranches of mortgage- backed securities originally rated triple-A, despite the mass downgrades, only about 10 percent of Alt-A and 4 percent of subprime securities had been “materially impaired”—meaning that losses were imminent or had already been suffered—by the end of 2009” (pp. 228–29). Park (2011) calculates the realized principal losses on the $1.9 trillion of AAA/Aaa-rated subprime bonds issued between 2004 and 2007 to be 17 basis points as of February 2011.1 Though * We thank Fernando Alvarez, Hal Cole, Tore Ellingsen, Ken French, Mikhail Golosov, Veronica Guerrieri, Todd Keister, Nobu Kiyotaki, David K. Levine, Guido Lorenzoni, Kazuhiko Ohashi, Mario Pascoa, Vincenzo Quadrini, Adriano Rampini, Alp Simsek, Andrei Shleifer, Javier Suarez, Laura Veldkamp, Warren Weber, and seminar participants at Berkeley, Boston College, Columbia GSB, Dartmouth, EIEF, Federal Reserve Board, Maryland, Minneapolis Fed, Ohio State, Prince- ton, Richmond Fed, Rutgers, Stanford, Wesleyan, Wharton School, Yale, the ASU Conference on “Financial Intermediation and Payments,” the Bank of Japan Conference on “Real and Finan- cial Linkage and Monetary Policy,” the 2011 SED Meetings at Ghent, the 11th FDIC Annual Bank Research Conference, the Tepper-LAEF Conference on “Advances in Macro-Finance,” the Riksbank Conference on “Beliefs and Business Cycles,” the 2nd BU/Boston Fed Conference on “Macro-Finance L