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September/October 2009, Part 1, 
Vol. 91, No. 5
Posted 2009-09-01

Systemic Risk and the Financial Crisis: A Primer

by James Bullard, Christopher J. Neely, and David C. Wheelock

How did problems in a relatively small portion of the home mortgage market trigger the most severe financial crisis in the United States since the Great Depression? Several developments played a role, including the proliferation of complex mortgage-backed securities and derivatives with highly opaque structures, high leverage, and inadequate risk management.