API Seminar(2008/04/21)
Date: April 21, 2008 13:30-15:00
Venue: K307 CSEAS, Kyoto University
Title：Old Wine in New Bottle: Subprime Mortgage Crisis Causes and Consequences
Speaker： Dr. Lim Mah Hui
Commentator: Prof. Shigeyuki Abe (Doshisha University)
Abstract:
This paper seeks to explain the causes and consequences of the U.S.
subprime mortgage crisis and how this has led to a generalized credit
crunch in other financial sectors that ultimately affects the real
economy. It postulates that despite the recent financial innovations,
the financial strategies that led to the present crisis are similar to
those found in the U.S. savings and loans debacle of the late 80s and
in the Asian financial crisis of late 90s. They are as the title
implies: old wine in new bottle – financial leveraging and funding
mismatch. Going beyond these financial practices, the underlying
structural causes of the crisis are located in the loose monetary
policies of central banks, financial deregulation, and excess liquidity
in financial markets that is a consequence of the kind of economic
growth that produces various imbalances – global current account
imbalance, financial sector imbalance, and wealth and income imbalance.
The consequences on risks, moral hazards and rolling bubbles are
discussed. Comparison of similarities and differences with banking
crises in Asia and Japan will be discussed.
Michael Lim Mah Hui taught political economy and sociology in various
U.S. and Malaysian universities before he joined international banking.
He has over twenty years experience as an investment, commercial, and
development banker. He worked in Chemical Bank (now JP Morgan Chase),
Credit Suisse First Boston, Deutsche and Asian Development Bank. He is
now a senior fellow with the Asian Public Intellectual Program of the
Nippon Foundation.