NORTH CAROLINA BANKING INSTITUTE Volume 13 | Issue 1 Article 3 2009 Wall Street Meets Main Street: Understanding the Financial Crisis Eamonn K. Moran Follow this and additional works at: http://scholarship.law.unc.edu/ncbi Part of the Banking and Finance Law Commons Recommended Citation Eamonn K. Moran, Wall Street Meets Main Street: Understanding the Financial Crisis, 13 N.C. Banking Inst. 5 (2009). Available at: http://scholarship.law.unc.edu/ncbi/vol13/iss1/3 This Article is brought to you for free and open access by Carolina Law Scholarship Repository. It has been accepted for inclusion in North Carolina Banking Institute by an authorized administrator of Carolina Law Scholarship Repository. For more information, please contact
[email protected]. WALL STREET MEETS MAIN STREET: UNDERSTANDING THE FINANCIAL CRISIS EAMONN K. MORAN* TABLE OF CONTENTS I. INTRODUCTION .............................................................................. 7 II. THE ORIGINS OF THE CREDIT CRISIS ...................................... 13 A. Federal Reserve Interest Rate Reductions ................. 13 B. The Nature of the Lender - Borrower Relationship ..... 15 C. Overextended Homeowners ........................................ 16 D. The Rise of Subprime Lending - The Essentials ..... 20 E. The Politics of Homeownership ................................... 25 F. The Current Housing Crisis: Reverberating Effects of Subprim e Lending ................................................... 30 III. FINANCIAL INNOVATION: THE GROWTH OF COMPLEX FINANCIAL INSTRUMENTS