The US Housing Market and the Subprime Mortgage Crisis (B): Impact on the US Economy

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:


Case Code : BENV015 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges


Case Length : 28 Pages
Period : 2001-2007
Pub Date : 2008
Teaching Note : Not Available
Organization : -
Industry : Financial Services
Countries : USA


In 2006, with rising interest rates and declining house prices, the subprime mortgage borrowers in the US were seriously affected, with several of them failing to make payments on their mortgage loans. Over time, the crisis intensified, with increasing numbers of delinquencies leading to foreclosures, and ending up in repossessions. The secondary mortgage market was also affected by the crisis, and with the contagion spreading beyond sub prime securities, liquidity in the credit market dried up as banks and other financial institutions, fearing counterparty risks, became increasingly reluctant to lend to each other.

The case discusses the subprime mortgage crisis in the US and the circumstances that led to the crisis.

It analyzes the effects of this crisis on different sectors of the US economy. The case also describes different initiatives taken by the US government and the US Federal Reserve.


Understand the origins of the US subprime mortgage crisis.

Analyze the effects of the crisis on the US economy.

Evaluate the initiatives of the US government and the US Federal reserve to tackle the crisis.

Analyze the long term impact of the crisis on the world's financial markets and the US economy.


  Page No.
Introduction 1
The Origins of the Subprime Mortgage Crisis 3
Effects of the Mortgage Crisis on the US Economy 4
Dealing with the Crisis 7
Some Perspectives 10
Looking Ahead 12
Exhibits 14


US Housing Market, Interest rate cut, Money auctions, Subprime Crisis, Mortgage backed Securities, Housing bubble, Secondary Mortgage market, Federal Funds Rate, Collateralized Debt obligations, US Federal Reserve, Recession, Bear Stearns, Inflation

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