Articles
Financial Crisis in the U.S.: Pursuit of Liquidity and Increasing Financial Fragility
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AuthorBokhyun Cho
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Year2009
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VolumeVol.57
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NumberNo.1
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The financial crisis in the U.S. differs from the other financial crises which
have developed in many countries. The U.S. financial crisis occurred in the
country that have the most developed financial market and the most effective
supervision authorities, and rooted in the increasing risk in capital market
rather than in the increasing in bank lending. The U.S. financial crisis,
therefore, may be explained differently from the existing financial crisis
theories.
This paper argues that the U.S. financial crisis arises from the
strengthening of the nature of finance, that is the pursuit of financial liquidity
and profitability, and the institutional development, which can support the
pursuit of financial nature, not from the moral hazard of financial institutions.
The pursuit of liquidity in financial sector has developed the securitization in
the capital market and it has boosted the lending boom. These resulted in the
excess expansion in the trading of capital market and the lending boom in the
subprime mortgage market. -
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