When "confidence" is lost, "liquidity dries up." We investigate the meaning of "confidence" and "liquidity" in the context of the current financial crisis. The financial crisis is a manifestation of an age-old problem with private money creation, banking panics. We explain this and provide some...

The Panic of 2007-2008 was a run on the sale and repurchase market (the "repo" market), which is a very large, short-term market that provides financing for a wide range of securitization activities and financial institutions. Repo transactions are collateralized, frequently with securitized...

Why did the failure of Lehman Brothers make the financial crisis dramatically worse? The financial crisis was a process of a build-up of risk during the crisis prior to the Lehman failure. Market participants tried to preserve an option or exit by shortening maturities - the "flight from...

All economists should be conversant with "what happened?" during the financial crisis of 2007-2009. We select and summarize 16 documents, including academic papers and reports from regulatory and international agencies. This reading list covers the key facts and mechanisms in the build-up of...