The U.S. economy suffered in 2007–10 from crises in mortgage foreclosures and in financial markets, as well as a long recession that some have referred to as the Great Recession. The links between these events, or more broadly their causes, extent, and effects are sources of continuing controversy and uncertainty. This paper attempts to disentangle the links between the mortgage foreclosure crisis, the financial crisis, a possible banking crisis, and the Great Recession, at least in terms of timing, and also to provide an alternative view to the conventional wisdom, especially for the links of the crises to the recession and to each other.
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*John A. Tatom is the President of Thoroughbred Economics, a consultancy in financial economics that serves universities, central banks, financial institutions, and other private clients. From 2005 to March 2012, he was Director of Research at Networks Financial Institute and Associate Professor of Finance at Indiana State University and Fellow, Institute for Applied Economics, Global Health and the Study of Business Enterprise, Johns Hopkins University. Previously he was an adjunct professor in the Economics Department at DePaul University and also, in 2003–04, a Senior Fellow at the Tax Foundation in Washington, DC. Earlier he served in various capacities for UBS, including chief US Economist in the asset allocation and currency group at UBS Asset Management, Executive Director and head of country research and limit control in Zurich, and lead economist for emerging market and developing countries in Zurich. From 1976 to 1995, he was Assistant Vice President and policy adviser in the Research Department of the Federal Reserve Bank of St. Louis. He has taught at several other colleges and universities. He holds a Ph.D. from Texas A&M University.