Answer: deficient in actuality and change

Context: Whitehead thus sees God and the world as fulfilling one another. He sees entities in the world as fluent and changing things that yearn for a permanence which only God can provide by taking them into God's self, thereafter changing God and affecting the rest of the universe throughout time. On the other hand, he sees God as permanent but as deficient in actuality and change: alone, God is merely eternally unrealized possibilities, and requires the world to actualize them. God gives creatures permanence, while the creatures give God actuality and change. Here it is worthwhile to quote Whitehead at length:

Question: In what way did Whitehead view God as deficient?


Answer: merely eternally unrealized possibilities

Question: What did Whitehead claim God would be without the world?


Answer: Whitehead thus sees God and the world as fulfilling one another

Question: How does Whitehead view the relationship between God an the world?


Answer: He sees entities in the world as fluent and changing things that yearn for a permanence which only God can provide

Question: How does he define entities' need for God?


Answer: by taking them into God's self, thereafter changing God and affecting the rest of the universe throughout time

Question: How dis Whitehead believe God provided permanence to entities?


Answer: individual

Context: For Whitehead the core of religion was individual. While he acknowledged that individuals cannot ever be fully separated from their society, he argued that life is an internal fact for its own sake before it is an external fact relating to others. His most famous remark on religion is that "religion is what the individual does with his own solitariness ... and if you are never solitary, you are never religious." Whitehead saw religion as a system of general truths that transformed a person's character. He took special care to note that while religion is often a good influence, it is not necessarily good – an idea which he called a "dangerous delusion" (e.g., a religion might encourage the violent extermination of a rival religion's adherents).

Question: What did Whitehead believe was the basis of religion?


Answer: "religion is what the individual does with his own solitariness ... and if you are never solitary, you are never religious."

Question: What is Whitehead's most famous statement on religion?


Answer: a system of general truths that transformed a person's character

Question: How did Whitehead define religion?


Answer: while religion is often a good influence, it is not necessarily good

Question: How did Whitehead define "dangerous delusion" as it relates to religion?


Answer: solitariness

Context: However, while Whitehead saw religion as beginning in solitariness, he also saw religion as necessarily expanding beyond the individual. In keeping with his process metaphysics in which relations are primary, he wrote that religion necessitates the realization of "the value of the objective world which is a community derivative from the interrelations of its component individuals." In other words, the universe is a community which makes itself whole through the relatedness of each individual entity to all the others – meaning and value do not exist for the individual alone, but only in the context of the universal community. Whitehead writes further that each entity "can find no such value till it has merged its individual claim with that of the objective universe. Religion is world-loyalty. The spirit at once surrenders itself to this universal claim and appropriates it for itself." In this way the individual and universal/social aspects of religion are mutually dependent.

Question: In what state did Whitehead believe religion began?


Answer: "the value of the objective world which is a community derivative from the interrelations of its component individuals."

Question: What realization did Whitehead believe religion made necessary?


Answer: meaning and value do not exist for the individual alone, but only in the context of the universal community

Question: What did Whitehead believe was necessary for an entity to have meaning and value?


Answer: The spirit at once surrenders itself to this universal claim and appropriates it for itself

Question: How does Whitehead describe religion as world-loyalty?


Answer: the individual and universal/social aspects of religion are mutually dependent

Question: What did Whitehead believe was the relationship between the individual and social aspects of religion?


Answer: through the work of his students and admirers rather

Context: Overall, however, Whitehead's influence is very difficult to characterize. In English-speaking countries, his primary works are little-studied outside of Claremont and a select number of liberal graduate-level theology and philosophy programs. Outside of these circles his influence is relatively small and diffuse, and has tended to come chiefly through the work of his students and admirers rather than Whitehead himself. For instance, Whitehead was a teacher and long-time friend and collaborator of Bertrand Russell, and he also taught and supervised the dissertation of Willard Van Orman Quine, both of whom are important figures in analytic philosophy – the dominant strain of philosophy in English-speaking countries in the 20th century. Whitehead has also had high-profile admirers in the continental tradition, such as French post-structuralist philosopher Gilles Deleuze, who once dryly remarked of Whitehead that "he stands provisionally as the last great Anglo-American philosopher before Wittgenstein's disciples spread their misty confusion, sufficiency, and terror." French sociologist and anthropologist Bruno Latour even went so far as to call Whitehead "the greatest philosopher of the 20th century."

Question: Where has interest outside of those areas mainly come from?


Answer: Bruno Latour

Question: What French sociologist and anthropologist stated that Whitehead was "the greatest philosopher of the 20th century"?


Answer: Claremont and a select number of liberal graduate-level theology and philosophy programs

Question: Where are Whitehead's works primarily studied in English-speaking countries?


Answer: Bertrand Russell, and he also taught and supervised the dissertation of Willard Van Orman Quine

Question: Who are two of Whitehead's students that have gone on to become renowned in the field of analytic philosophy?


Answer: "he stands provisionally as the last great Anglo-American philosopher before Wittgenstein's disciples spread their misty confusion, sufficiency, and terror."

Question: What did Gilles Deleuze say about Whitehead?


Answer: American progressive theology

Context: Historically Whitehead's work has been most influential in the field of American progressive theology. The most important early proponent of Whitehead's thought in a theological context was Charles Hartshorne, who spent a semester at Harvard as Whitehead's teaching assistant in 1925, and is widely credited with developing Whitehead's process philosophy into a full-blown process theology. Other notable process theologians include John B. Cobb, Jr., David Ray Griffin, Marjorie Hewitt Suchocki, C. Robert Mesle, Roland Faber, and Catherine Keller.

Question: In what field of study has Whitehead's work been most influential in the United States?


Answer: Charles Hartshorne

Question: Who was the most important early supporter of Whitehead's work in the context of theology?


Answer: developing Whitehead's process philosophy into a full-blown process theology

Question: What advancement of Whitehead's process philosophy is attributed to Charles Hartshorne?


Answer: John B. Cobb, Jr., David Ray Griffin, Marjorie Hewitt Suchocki, C. Robert Mesle, Roland Faber, and Catherine Keller

Question: Who are some other distinguished process theologians?


Answer: God's relational nature

Context: Process theology typically stresses God's relational nature. Rather than seeing God as impassive or emotionless, process theologians view God as "the fellow sufferer who understands", and as the being who is supremely affected by temporal events. Hartshorne points out that people would not praise a human ruler who was unaffected by either the joys or sorrows of his followers – so why would this be a praise-worthy quality in God? Instead, as the being who is most affected by the world, God is the being who can most appropriately respond to the world. However, process theology has been formulated in a wide variety of ways. C. Robert Mesle, for instance, advocates a "process naturalism", i.e. a process theology without God.

Question: What aspect of God is usually emphasized in process theology?


Answer: "the fellow sufferer who understands", and as the being who is supremely affected by temporal events

Question: How is God usually perceived by process theologians?


Answer: people would not praise a human ruler who was unaffected by either the joys or sorrows of his followers – so why would this be a praise-worthy quality in God?

Question: Why did Hartshorne feel that God must be affected by people?


Answer: as the being who is most affected by the world, God is the being who can most appropriately respond to the world

Question: Why would God being substantially affected by the world be beneficial?


Answer: "process naturalism", i.e. a process theology without God.

Question: What type of process theology does C. Robert Mesle promote?


Answer: biology and economics

Context: In fact, process theology is difficult to define because process theologians are so diverse and transdisciplinary in their views and interests. John B. Cobb, Jr. is a process theologian who has also written books on biology and economics. Roland Faber and Catherine Keller integrate Whitehead with poststructuralist, postcolonialist, and feminist theory. Charles Birch was both a theologian and a geneticist. Franklin I. Gamwell writes on theology and political theory. In Syntheism - Creating God in The Internet Age, futurologists Alexander Bard and Jan Söderqvist repeatedly credit Whitehead for the process theology they see rising out of the participatory culture expected to dominate the digital era.

Question: What subjects has John B. Cobb, Jr. written books on other than process theology?


Answer: poststructuralist, postcolonialist, and feminist theory

Question: What theories do Roland Faber and Catherine Keller combine with Whitehead's ideas?


Answer: geneticist

Question: What was Charles Birch's profession besides theologian?


Answer: Alexander Bard and Jan Söderqvist

Question: Who authored "Syntheism - Creating God in the Internet Age"?


Answer: process theologians are so diverse and transdisciplinary in their views and interests

Question: Why is there difficulty in defining process theology ?


Answer: "an ultimate craving to infuse into the insistent particularity of emotion that non-temporal generality which primarily belongs to conceptual thought alone."

Context: Whitehead also described religion more technically as "an ultimate craving to infuse into the insistent particularity of emotion that non-temporal generality which primarily belongs to conceptual thought alone." In other words, religion takes deeply felt emotions and contextualizes them within a system of general truths about the world, helping people to identify their wider meaning and significance. For Whitehead, religion served as a kind of bridge between philosophy and the emotions and purposes of a particular society. It is the task of religion to make philosophy applicable to the everyday lives of ordinary people.

Question: What was Whitehead's technical definition of religion?


Answer: religion takes deeply felt emotions and contextualizes them within a system of general truths about the world

Question: What did Whitehead believe religion did with strong emotions?


Answer: a kind of bridge between philosophy and the emotions and purposes of a particular society

Question: What purpose did Whitehead believe religion served?


Answer: It is the task of religion to make philosophy applicable to the everyday lives of ordinary people.

Question: What did Whitehead believe was the job of religion regarding philosophy?


Answer: pioneer in the fields of organizational theory and organizational behavior

Context: Margaret Stout and Carrie M. Staton have also written recently on the mutual influence of Whitehead and Mary Parker Follett, a pioneer in the fields of organizational theory and organizational behavior. Stout and Staton see both Whitehead and Follett as sharing an ontology that "understands becoming as a relational process; difference as being related, yet unique; and the purpose of becoming as harmonizing difference." This connection is further analyzed by Stout and Jeannine M. Love in Integrative Process: Follettian Thinking from Ontology to Administration

Question: What is Mary Parker Follett known for?


Answer: ontology that "understands becoming as a relational process; difference as being related, yet unique; and the purpose of becoming as harmonizing difference."

Question: What do Margaret Stout and Carrie M. Staton view as commonalities between Whitehead and Follett?


Answer: Integrative Process: Follettian Thinking from Ontology to Administration

Question: What book did Stout and Jeanine M. Love author that further examines the on between Whitehead and Follett?


Answer: continue to invest client funds in over-priced (under-yielding) investments

Context: Moreover, a conflict of interest between professional investment managers and their institutional clients, combined with a global glut in investment capital, led to bad investments by asset managers in over-priced credit assets. Professional investment managers generally are compensated based on the volume of client assets under management. There is, therefore, an incentive for asset managers to expand their assets under management in order to maximize their compensation. As the glut in global investment capital caused the yields on credit assets to decline, asset managers were faced with the choice of either investing in assets where returns did not reflect true credit risk or returning funds to clients. Many asset managers chose to continue to invest client funds in over-priced (under-yielding) investments, to the detriment of their clients, in order to maintain their assets under management. This choice was supported by a "plausible deniability" of the risks associated with subprime-based credit assets because the loss experience with early "vintages" of subprime loans was so low.

Question: What did many asset managers decide to do to the detriment of their clients?


Answer: a conflict of interest

Question: What led to bad investments by asset managers in over-priced credit assets?


Answer: Professional investment managers

Question: Who is compensated based on the volume of client assets they have under management?


Answer: to maximize their compensation

Question: What is the incentive for asset managers to expand their assets under management?


Answer: plausible deniability

Question: What rationale did asset managers who continued to invest in over-priced investments to the detriment of their clients use?


Answer: Countrywide Financial

Context: The first visible institution to run into trouble in the United States was the Southern California–based IndyMac, a spin-off of Countrywide Financial. Before its failure, IndyMac Bank was the largest savings and loan association in the Los Angeles market and the seventh largest mortgage originator in the United States. The failure of IndyMac Bank on July 11, 2008, was the fourth largest bank failure in United States history up until the crisis precipitated even larger failures, and the second largest failure of a regulated thrift. IndyMac Bank's parent corporation was IndyMac Bancorp until the FDIC seized IndyMac Bank. IndyMac Bancorp filed for Chapter 7 bankruptcy in July 2008.

Question: Who was Southern California-based IndyMac a spin-off of?


Answer: July 11, 2008

Question: On what date did IndyMac fail?


Answer: IndyMac

Question: Which financial institution was the first one visible to run into trouble in the United States?


Answer: IndyMac Bank

Question: Before its failure, which savings and loan association was the seventh largest mortgage originator in the United States?


Answer: IndyMac Bancorp

Question: Who was IndyMac's parent corporation?


Answer: April 2008

Context: IndyMac reported that during April 2008, Moody's and Standard & Poor's downgraded the ratings on a significant number of Mortgage-backed security (MBS) bonds including $160 million of those issued by IndyMac and which the bank retained in its MBS portfolio. IndyMac concluded that these downgrades would have negatively impacted the Company's risk-based capital ratio as of June 30, 2008. Had these lowered ratings been in effect at March 31, 2008, IndyMac concluded that the bank's capital ratio would have been 9.27% total risk-based. IndyMac warned that if its regulators found its capital position to have fallen below "well capitalized" (minimum 10% risk-based capital ratio) to "adequately capitalized" (8–10% risk-based capital ratio) the bank might no longer be able to use brokered deposits as a source of funds.

Question: When did Moody's and Standard & Poor downgrade a significant number of IndyMac's MBS bonds?


Answer: 9.27%

Question: If IndyMac's downgraded MBS bond ratings had been in effect at March 31, 2008, what would the bank's capital ratio have been?


Answer: $160 million

Question: What was the value of IndyMac's MBS bonds retained in its MBS portfolio that were downgraded in April 2008?


Answer: Moody's

Question: What was one of the agencies that downgraded a significant number of IndyMac's MBS bonds in April 2008?


Answer: minimum 10% risk-based

Question: What is a well capitalized ratio?


Answer: Charles Schumer (D-NY)

Context: Senator Charles Schumer (D-NY) would later point out that brokered deposits made up more than 37 percent of IndyMac's total deposits and ask the Federal Deposit Insurance Corporation (FDIC) whether it had considered ordering IndyMac to reduce its reliance on these deposits. With $18.9 billion in total deposits reported on March 31, Senator Schumer would have been referring to a little over $7 billion in brokered deposits. While the breakout of maturities of these deposits is not known exactly, a simple averaging would have put the threat of brokered deposits loss to IndyMac at $500 million a month, had the regulator disallowed IndyMac from acquiring new brokered deposits on June 30.

Question: Who is the Senator that asked FDIC if it had considered ordering IndyMac to reduce its reliance on brokered deposits?


Answer: Federal Deposit Insurance Corporation

Question: What does the abbreviation FDIC stand for?


Answer: a little over $7 billion

Question: How much of IndyMac's total deposits of $18.9 billion on March 31, 2008 were considered brokered deposits?


Answer: June 30

Question: Had the FDIC disallowed IndyMac from acquiring new brokered deposits on this date, the threat of brokered deposit losses would have been $500 million a month?


Answer: $500 million

Question: How much was the threat of brokered deposit losses per month to IndyMac?


Answer: $1.55 billion

Context: When home prices declined in the latter half of 2007 and the secondary mortgage market collapsed, IndyMac was forced to hold $10.7 billion of loans it could not sell in the secondary market. Its reduced liquidity was further exacerbated in late June 2008 when account holders withdrew $1.55 billion or about 7.5% of IndyMac's deposits. This “run” on the thrift followed the public release of a letter from Senator Charles Schumer to the FDIC and OTS. The letter outlined the Senator’s concerns with IndyMac. While the run was a contributing factor in the timing of IndyMac’s demise, the underlying cause of the failure was the unsafe and unsound manner in which the thrift was operated.

Question: How much in deposits did account holders withdraw from IndyMac in late June 2008?


Answer: 7.5%

Question: What percent of IndyMac's deposits were withdrawn by account holders in late June 2008?


Answer: $10.7 billion

Question: What was the value of loans IndyMac was forced to hold when the secondary mortgage market collapsed in late 2007?


Answer: Charles Schumer

Question: Who is the Senator that released a letter to the FDIC and OTS that prompted a "run" on IndyMac?


Answer: unsafe and unsound manner in which the thrift was operated

Question: What was the underlying cause of the failure on IndyMac?


Answer: IndyMac Federal Bank, FSB

Context: On July 11, 2008, citing liquidity concerns, the FDIC put IndyMac Bank into conservatorship. A bridge bank, IndyMac Federal Bank, FSB, was established to assume control of IndyMac Bank's assets, its secured liabilities, and its insured deposit accounts. The FDIC announced plans to open IndyMac Federal Bank, FSB on July 14, 2008. Until then, depositors would have access their insured deposits through ATMs, their existing checks, and their existing debit cards. Telephone and Internet account access was restored when the bank reopened. The FDIC guarantees the funds of all insured accounts up to US$100,000, and has declared a special advance dividend to the roughly 10,000 depositors with funds in excess of the insured amount, guaranteeing 50% of any amounts in excess of $100,000. Yet, even with the pending sale of Indymac to IMB Management Holdings, an estimated 10,000 uninsured depositors of Indymac are still at a loss of over $270 million.

Question: What was the name of the bridge bank established to assume control of IndyMac Bank's assets, liabilities and deposit accounts?


Answer: US$100,000

Question: What is the maximum amount of funds the FDIC guarantees in insured accounts?


Answer: roughly 10,000 depositors

Question: How many IndyMac account holders held funds in excess of the FDIC's insured amount of US$100,000?


Answer: July 11, 2008

Question: On what date did the FDIC put IndyMac Bank into conservatorship?


Answer: July 14, 2008

Question: On what date did the FDIC plan to open IndyMac Federal Bank, FSB?


Answer: Over 100

Context: Initially the companies affected were those directly involved in home construction and mortgage lending such as Northern Rock and Countrywide Financial, as they could no longer obtain financing through the credit markets. Over 100 mortgage lenders went bankrupt during 2007 and 2008. Concerns that investment bank Bear Stearns would collapse in March 2008 resulted in its fire-sale to JP Morgan Chase. The financial institution crisis hit its peak in September and October 2008. Several major institutions either failed, were acquired under duress, or were subject to government takeover. These included Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG. On Oct. 6, 2008, three weeks after Lehman Brothers filed the largest bankruptcy in U.S. history, Lehman's former CEO found himself before Representative Henry A. Waxman, the California Democrat who chaired the House Committee on Oversight and Government Reform. Fuld said he was a victim of the collapse, blaming a "crisis of confidence" in the markets for dooming his firm.

Question: How many mortgage lenders went bankrupt during 2007 and 2008?


Answer: Bear Stearns

Question: Who is the investment bank that was feared to collapse in March 2008 and was sold in a fire-sale to JP Morgan Chase?


Answer: September and October 2008

Question: When did the financial institution crisis hit its peak?


Answer: Oct. 6, 2008

Question: When did Lehman's former CEO appear before Representative Henry A. Waxman?


Answer: Lehman Brothers

Question: What firm filed the largest bankruptcy in U.S. history?


Answer: money market funds

Context: In September 2008, the crisis hit its most critical stage. There was the equivalent of a bank run on the money market funds, which frequently invest in commercial paper issued by corporations to fund their operations and payrolls. Withdrawal from money markets were $144.5 billion during one week, versus $7.1 billion the week prior. This interrupted the ability of corporations to rollover (replace) their short-term debt. The U.S. government responded by extending insurance for money market accounts analogous to bank deposit insurance via a temporary guarantee and with Federal Reserve programs to purchase commercial paper. The TED spread, an indicator of perceived credit risk in the general economy, spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008, reaching a record 4.65% on October 10, 2008.

Question: The equivalent of a bank run on which funds occurred in September 2008?


Answer: commercial paper issued by corporations

Question: What do money market funds frequently invest in?


Answer: September 2008

Question: When did the financial crisis hit its most critical stage?


Answer: $144.5 billion

Question: How much was withdrawn from money markets during one week in September 2008?


Answer: 4.65%

Question: What was the record high for the TED spread on October 10, 2008?


Answer: shadow banking system

Context: Economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner explain the credit crisis via the implosion of the shadow banking system, which had grown to nearly equal the importance of the traditional commercial banking sector as described above. Without the ability to obtain investor funds in exchange for most types of mortgage-backed securities or asset-backed commercial paper, investment banks and other entities in the shadow banking system could not provide funds to mortgage firms and other corporations.

Question: Economist Paul Krugman explained the credit crisis via the implosion of which system?


Answer: shadow banking system

Question: What is the system with nearly equal the importance of traditional commercial banking?


Answer: investor funds

Question: The shadow banking system could not provide funds to mortgage firms and other corporations without the ability to obtain which funds?


Answer: U.S. Treasury Secretary

Question: What was Timothy Geithner's position during the fall of 2008?


Answer: nearly one-third

Context: This meant that nearly one-third of the U.S. lending mechanism was frozen and continued to be frozen into June 2009. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume". The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions". While traditional banks have raised their lending standards, it was the collapse of the shadow banking system that is the primary cause of the reduction in funds available for borrowing.

Question: How much of the U.S. lending mechanism was frozen until June 2009?


Answer: the collapse of the shadow banking system

Question: What is the primary cause of the reduction in funds available for borrowing?


Answer: Brookings Institution

Question: What institution reported that the traditional banking systems does not have the capital to close the gap in the lending mechanism?


Answer: some forms of securitization

Question: What is likely to vanish forever, as a result of excessively loose credit conditions?


Answer: capital

Question: As of June 2009, the Brookings Institution reports that traditional banking system does not have enough of what to close the lending gap?


Answer: more than a quarter

Context: There is a direct relationship between declines in wealth and declines in consumption and business investment, which along with government spending, represent the economic engine. Between June 2007 and November 2008, Americans lost an estimated average of more than a quarter of their collective net worth.[citation needed] By early November 2008, a broad U.S. stock index the S&P 500, was down 45% from its 2007 high. Housing prices had dropped 20% from their 2006 peak, with futures markets signaling a 30–35% potential drop. Total home equity in the United States, which was valued at $13 trillion at its peak in 2006, had dropped to $8.8 trillion by mid-2008 and was still falling in late 2008. Total retirement assets, Americans' second-largest household asset, dropped by 22%, from $10.3 trillion in 2006 to $8 trillion in mid-2008. During the same period, savings and investment assets (apart from retirement savings) lost $1.2 trillion and pension assets lost $1.3 trillion. Taken together, these losses total a staggering $8.3 trillion. Since peaking in the second quarter of 2007, household wealth is down $14 trillion.

Question: How much net worth did Americans lose between June 2007 and November 2008?


Answer: 45%

Question: In November 2008, how much was the U.S. stock index down from its 2007 high?


Answer: 20%

Question: In November 2008, how much had housing prices drop from their 2006 peak?


Answer: $13 trillion

Question: How much was home equity valued in the United States at its peak in 2006?


Answer: $8.8 trillion

Question: How much was home equity valued in the United States in mid-2008?


Answer: serious

Context: In November 2008, economist Dean Baker observed: "There is a really good reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years ago have little or nothing today. Businesses are facing the worst downturn since the Great Depression. This matters for credit decisions. A homeowner with equity in her home is very unlikely to default on a car loan or credit card debt. They will draw on this equity rather than lose their car and/or have a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the case of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007... While many banks are obviously at the brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. The problem with the economy is the loss of close to $6 trillion in housing wealth and an even larger amount of stock wealth.

Question: According to economist Dean Baker, a homeowner who has no equity if this type default risk?


Answer: loss of close to $6 trillion in housing wealth

Question: What is one of the major problems with the economy in November 2008?


Answer: Tens of millions

Question: How many homeowners who had substantial equity in their homes two years ago, have little no equity as of November 2008?


Answer: future profits

Question: What does the creditworthiness of businesses depend on?


Answer: much worse

Question: How did profit prospects for businesses look in November 2008 compared to November 2007?


Answer: global economic collapse

Context: Several commentators have suggested that if the liquidity crisis continues, an extended recession or worse could occur. The continuing development of the crisis has prompted fears of a global economic collapse although there are now many cautiously optimistic forecasters in addition to some prominent sources who remain negative. The financial crisis is likely to yield the biggest banking shakeout since the savings-and-loan meltdown. Investment bank UBS stated on October 6 that 2008 would see a clear global recession, with recovery unlikely for at least two years. Three days later UBS economists announced that the "beginning of the end" of the crisis had begun, with the world starting to make the necessary actions to fix the crisis: capital injection by governments; injection made systemically; interest rate cuts to help borrowers. The United Kingdom had started systemic injection, and the world's central banks were now cutting interest rates. UBS emphasized the United States needed to implement systemic injection. UBS further emphasized that this fixes only the financial crisis, but that in economic terms "the worst is still to come". UBS quantified their expected recession durations on October 16: the Eurozone's would last two quarters, the United States' would last three quarters, and the United Kingdom's would last four quarters. The economic crisis in Iceland involved all three of the country's major banks. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history.

Question: In 2008, what type collapse was feared?


Answer: UBS

Question: What investment bank stated on October 6 that 2008 would see a global recession lasting for at least two years?


Answer: three quarters

Question: On October 16, 2008, how long did UBS predict the United States' recession would last?


Answer: Iceland

Question: Relative to the size of its economy, what country's banking collapse was the largest experienced by any country in economic history?


Answer: capital injection

Question: What was one of the actions taken by government to fix the financial crisis?


Answer: more than a third

Context: The Brookings Institution reported in June 2009 that U.S. consumption accounted for more than a third of the growth in global consumption between 2000 and 2007. "The US economy has been spending too much and borrowing too much for years and the rest of the world depended on the U.S. consumer as a source of global demand." With a recession in the U.S. and the increased savings rate of U.S. consumers, declines in growth elsewhere have been dramatic. For the first quarter of 2009, the annualized rate of decline in GDP was 14.4% in Germany, 15.2% in Japan, 7.4% in the UK, 18% in Latvia, 9.8% in the Euro area and 21.5% for Mexico.

Question: According to The Brookings Institution report in June 2009, how much growth did U.S. consumption account for between 2000 and 2007?


Answer: 14.4%

Question: For the first quarter of 2009, what was the annualized rate of decline in GDP in Germany?


Answer: 21.5%

Question: For the first quarter of 2009, what was the annualized rate of decline in GDP in Mexico?


Answer: the rest of the world

Question: Who depended on the U.S. consumer as a source of global demand?


Answer: recession in the U.S.

Question: What is one reason for the decline in growth around the world in 2009?


Answer: close to zero

Context: Some developing countries that had seen strong economic growth saw significant slowdowns. For example, growth forecasts in Cambodia show a fall from more than 10% in 2007 to close to zero in 2009, and Kenya may achieve only 3–4% growth in 2009, down from 7% in 2007. According to the research by the Overseas Development Institute, reductions in growth can be attributed to falls in trade, commodity prices, investment and remittances sent from migrant workers (which reached a record $251 billion in 2007, but have fallen in many countries since). This has stark implications and has led to a dramatic rise in the number of households living below the poverty line, be it 300,000 in Bangladesh or 230,000 in Ghana. Especially states with a fragile political system have to fear that investors from Western states withdraw their money because of the crisis. Bruno Wenn of the German DEG recommends to provide a sound economic policymaking and good governance to attract new investors

Question: What is the growth forecast for Cambodia in 2009?


Answer: $251 billion

Question: How much were remittances sent from migrant workers in 2007?


Answer: 300,000

Question: How many people live below the poverty line in Bangladesh?


Answer: sound economic policymaking and good governance

Question: What does Bruno Wenn of the German DEG recommend to attract new investors?


Answer: falls in trade

Question: According to Overseas Development Institute, what is one reason for the reduction in growth in developing countries?


Answer: Arab World

Context: The World Bank reported in February 2009 that the Arab World was far less severely affected by the credit crunch. With generally good balance of payments positions coming into the crisis or with alternative sources of financing for their large current account deficits, such as remittances, Foreign Direct Investment (FDI) or foreign aid, Arab countries were able to avoid going to the market in the latter part of 2008. This group is in the best position to absorb the economic shocks. They entered the crisis in exceptionally strong positions. This gives them a significant cushion against the global downturn. The greatest impact of the global economic crisis will come in the form of lower oil prices, which remains the single most important determinant of economic performance. Steadily declining oil prices would force them to draw down reserves and cut down on investments. Significantly lower oil prices could cause a reversal of economic performance as has been the case in past oil shocks. Initial impact will be seen on public finances and employment for foreign workers.

Question: What area of the world was less severely affected by the credit crunch according to The World Bank report In February 2009?


Answer: Foreign Direct Investment

Question: What does the abbreviation FDI stand for?


Answer: global downturn

Question: Arab countries entered the financial crisis in exceptionally strong positions giving them a cushion against this?


Answer: lower oil prices

Question: What will have the greatest impact on the global economic crisis?


Answer: oil prices

Question: What is the single most important determinant of economic performance?


Answer: 10.1%

Context: The output of goods and services produced by labor and property located in the United States—decreased at an annual rate of approximately 6% in the fourth quarter of 2008 and first quarter of 2009, versus activity in the year-ago periods. The U.S. unemployment rate increased to 10.1% by October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since the government began collecting the data in 1964. With the decline of gross domestic product came the decline in innovation. With fewer resources to risk in creative destruction, the number of patent applications flat-lined. Compared to the previous 5 years of exponential increases in patent application, this stagnation correlates to the similar drop in GDP during the same time period.

Question: What was the U.S. unemployment rate in October 2009?


Answer: 33

Question: What was the average hours per work week in October 2009?


Answer: 6%

Question: What was the annual rate of decrease for the output of goods and services produced by labor and property in 4Q 2008 and 1Q 2009?


Answer: 1983

Question: The U.E. employment rate was 10.2% in October 2009, which was the highest rate since what year?


Answer: patent applications

Question: The decline of gross domestic product also caused a decline in innovation, evidenced by the flat-lining of what?


Answer: faulty risk-weightings

Context: European regulators introduced Basel III regulations for banks. It increased capital ratios, limits on leverage, narrow definition of capital (to exclude subordinated debt), limit counter-party risk, and new liquidity requirements. Critics argue that Basel III doesn’t address the problem of faulty risk-weightings. Major banks suffered losses from AAA-rated created by financial engineering (which creates apparently risk-free assets out of high risk collateral) that required less capital according to Basel II. Lending to AA-rated sovereigns has a risk-weight of zero, thus increasing lending to governments and leading to the next crisis. Johan Norberg argues that regulations (Basel III among others) have indeed led to excessive lending to risky governments (see European sovereign-debt crisis) and the ECB pursues even more lending as the solution.

Question: Critics argue that Basel III doesn't address which problem?


Answer: financial engineering

Question: What term describes creating risk-free assets out of high risk collateral?


Answer: Basel III regulations

Question: What did European regulators introduce to increase the oversight of banks?


Answer: Johan Norberg

Question: Who argued that regulations led to excessive lending to risky governments?


Answer: capital ratios

Question: What was increased by Basel III regulations?


Answer: June 2009

Context: The U.S. recession that began in December 2007 ended in June 2009, according to the U.S. National Bureau of Economic Research (NBER) and the financial crisis appears to have ended about the same time. In April 2009 TIME magazine declared "More Quickly Than It Began, The Banking Crisis Is Over." The United States Financial Crisis Inquiry Commission dates the crisis to 2008. President Barack Obama declared on January 27, 2010, "the markets are now stabilized, and we've recovered most of the money we spent on the banks."

Question: When did the U.S. recession that began in December 2007 end?


Answer: June 2009

Question: When did the financial crisis appear to have ended?


Answer: 2008

Question: When does the United States Financial Crisis Inquiry Commission date the crisis to?


Answer: More Quickly Than It Began, The Banking Crisis Is Over."

Question: What was the name of the article that appeared in TIME magazine in April 2009 declaring the crisis over?


Answer: January 27, 2010

Question: On what date did President Barack Obama declare that the markets are stabilized?


Answer: "emerging" and "developing" economies

Context: Advanced economies led global economic growth prior to the financial crisis with "emerging" and "developing" economies lagging behind. The crisis completely overturned this relationship. The International Monetary Fund found that "advanced" economies accounted for only 31% of global GDP while emerging and developing economies accounted for 69% of global GDP from 2007 to 2014. In the tables, the names of emergent economies are shown in boldface type, while the names of developed economies are in Roman (regular) type.

Question: Who led global economic growth after the financial crisis?


Answer: 69%

Question: How much global GDP did emerging and developing economies account for from 2007 to 2014?


Answer: global economic growth

Question: What relationship between advanced and emerging/developing was completely overturned by the financial crisis of 2007?


Answer: 31%

Question: How much global GDP did "advanced" economies account for from 2007 to 2014?


Answer: Advanced economies

Question: What economies led global economic growth prior to the financial crisis?


Answer: Krugman

Context: Krugman's contention (that the growth of a commercial real estate bubble indicates that U.S. housing policy was not the cause of the crisis) is challenged by additional analysis. After researching the default of commercial loans during the financial crisis, Xudong An and Anthony B. Sanders reported (in December 2010): "We find limited evidence that substantial deterioration in CMBS [commercial mortgage-backed securities] loan underwriting occurred prior to the crisis." Other analysts support the contention that the crisis in commercial real estate and related lending took place after the crisis in residential real estate. Business journalist Kimberly Amadeo reports: "The first signs of decline in residential real estate occurred in 2006. Three years later, commercial real estate started feeling the effects. Denice A. Gierach, a real estate attorney and CPA, wrote:

Question: Who believed that the growth of the commercial real estate bubble indicated that U.S. housing policy was not the cause of the crisis?


Answer: December 2010

Question: When did Xudong An and Anthony B. Sanders issue a report about commercial mortgage-backed securities?


Answer: 2006

Question: According to business journalist Kimberly Amadeo, when did the first signs of decline in real estate occur?


Answer: commercial mortgage-backed securities

Question: What are CMBS?


Answer: the crisis in commercial real estate

Question: According to most analysts, what crisis took place after the crisis in residential real estate?


Answer: collateralized debt obligation

Context: In a Peabody Award winning program, NPR correspondents argued that a "Giant Pool of Money" (represented by $70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade. This pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with products such as the mortgage-backed security and the collateralized debt obligation that were assigned safe ratings by the credit rating agencies.

Question: What is one investment assigned safe ratings by the credit rating agencies?


Answer: $70 trillion

Question: How much was invested worldwide in fixed income investments?


Answer: roughly doubled in size

Question: How much did the pool of money invested worldwide in fixed income investments grow in size from 2000 to 2007?


Answer: mortgage-backed security

Question: What is an example of a product Wall Street invented to answer the demand for income generating investments?


Answer: U.S. Treasury bonds

Question: In the 2000s, investors were seeking higher yields than those offered by this investment?


Answer: collateralized debt obligation

Context: The collateralized debt obligation in particular enabled financial institutions to obtain investor funds to finance subprime and other lending, extending or increasing the housing bubble and generating large fees. This essentially places cash payments from multiple mortgages or other debt obligations into a single pool from which specific securities draw in a specific sequence of priority. Those securities first in line received investment-grade ratings from rating agencies. Securities with lower priority had lower credit ratings but theoretically a higher rate of return on the amount invested.

Question: What is the name of the securities that enabled financial institutions to obtain investor funds to finance subprime?


Answer: extending or increasing the housing bubble

Question: What was the outcome of collateralized debt obligations?


Answer: investment-grade ratings

Question: What type ratings did securities first in line receive from rating agencies?


Answer: single pool

Question: What type pool do collateralized debt obligations place their payments from mortgages into?


Answer: Securities with lower priority

Question: What securities had lower credit ratings but potentially a higher rate of return?


Answer: over 20%

Context: By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid the higher payments associated with rising interest rates and began to default. During 2007, lenders began foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006. This increased to 2.3 million in 2008, an 81% increase vs. 2007. By August 2008, 9.2% of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4%.

Question: How much had average U.S. housing prices declined by September 2008?


Answer: mid-2006

Question: When was the peak of U.S. housing prices?


Answer: nearly 1.3 million

Question: How many foreclosure proceedings were initiated by lenders in 2007?


Answer: 81%

Question: What was the percentage increase on foreclosure proceedings from 2007 to 2008?


Answer: 14.4%

Question: How many U.S. mortgages were either delinquent or in foreclosure by September 2009?


Answer: 1.0%

Context: Lower interest rates encouraged borrowing. From 2000 to 2003, the Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%. This was done to soften the effects of the collapse of the dot-com bubble and the September 2001 terrorist attacks, as well as to combat a perceived risk of deflation. As early as 2002 it was apparent that credit was fueling housing instead of business investment as some economists went so far as to advocate that the Fed "needs to create a housing bubble to replace the Nasdaq bubble". Moreover, empirical studies using data from advanced countries show that excessive credit growth contributed greatly to the severity of the crisis.

Question: Was was the federal funds rate target lowered to by the Federal Reserve in 2003?


Answer: to combat a perceived risk of deflation

Question: What is one reason the Federal Reserve lowered the federal funds rate target to 1.0% in 2003?


Answer: a housing bubble

Question: In the early 2000s, what type bubble did some economists believe the Fed needed to create to replace the Nasdaq bubble?


Answer: excessive credit growth

Question: What contributed greatly to the severity of the financial crisis of 2007?


Answer: Lower interest rates

Question: What encouraged borrowing from 2000 to 2003?


Answer: $650 billion

Context: Bernanke explained that between 1996 and 2004, the U.S. current account deficit increased by $650 billion, from 1.5% to 5.8% of GDP. Financing these deficits required the country to borrow large sums from abroad, much of it from countries running trade surpluses. These were mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that a country (such as the U.S.) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the U.S. to finance its imports.

Question: Per Bernanke, how much did the U.S. current account deficit increase between 1996 and 2004?


Answer: 5.8%

Question: What percentage of GDP was the U.S. current account deficit in 2004?


Answer: Asia and oil-exporting nations

Question: What emerging economies did the U.S. borrow money from between 1996 and 2004 to finance its imports?


Answer: capital account

Question: What type account is needed by the U.S. to balance an account deficit?


Answer: foreign funds

Question: Where did the U.S. obtain capital to finance its imports?


Answer: July 2004

Context: The Fed then raised the Fed funds rate significantly between July 2004 and July 2006. This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners. This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates, and it became riskier to speculate in housing. U.S. housing and financial assets dramatically declined in value after the housing bubble burst.

Question: When did the Fed begin raising Fed funds rate significantly?


Answer: adjustable-rate mortgage

Question: What does ARM stand for:


Answer: inversely

Question: How do asset prices generally move in relation to interest rates?


Answer: raised the Fed funds rate

Question: Beginning in July 2004, what did the Fed do to make ARM rates more expensive for homeowners?


Answer: dramatically declined in value

Question: How did U.S. housing and financial assets react to the housing bubble burst?


Answer: Citigroup

Context: Testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen III on events during his tenure as the Business Chief Underwriter for Correspondent Lending in the Consumer Lending Group for Citigroup (where he was responsible for over 220 professional underwriters) suggests that by the final years of the U.S. housing bubble (2006–2007), the collapse of mortgage underwriting standards was endemic. His testimony stated that by 2006, 60% of mortgages purchased by Citi from some 1,600 mortgage companies were "defective" (were not underwritten to policy, or did not contain all policy-required documents) – this, despite the fact that each of these 1,600 originators was contractually responsible (certified via representations and warrantees) that its mortgage originations met Citi's standards. Moreover, during 2007, "defective mortgages (from mortgage originators contractually bound to perform underwriting to Citi's standards) increased... to over 80% of production".

Question: Richard M. Bowen III testified to the Financial Crisis Inquiry Commission regarding his tenure at which financial institution?


Answer: 220

Question: How many underwriters was Richard M. Bowen III responsible for at Citigroup?


Answer: 60%

Question: What percent of mortgages purchased by Citigroup in 2006 were defective?


Answer: 1,600

Question: In 2006, how many mortgage companies were contractually responsible to meet Citi's standards?


Answer: over 80%

Question: During 2007, what was the percent of defective mortgages not underwritten to Citi's standards?


Answer: Clayton Holdings

Context: In separate testimony to Financial Crisis Inquiry Commission, officers of Clayton Holdings—the largest residential loan due diligence and securitization surveillance company in the United States and Europe—testified that Clayton's review of over 900,000 mortgages issued from January 2006 to June 2007 revealed that scarcely 54% of the loans met their originators’ underwriting standards. The analysis (conducted on behalf of 23 investment and commercial banks, including 7 "too big to fail" banks) additionally showed that 28% of the sampled loans did not meet the minimal standards of any issuer. Clayton's analysis further showed that 39% of these loans (i.e. those not meeting any issuer's minimal underwriting standards) were subsequently securitized and sold to investors.

Question: Who was the largest residential loan due diligence and securitization surveillance company?


Answer: 54%

Question: According to Clayton Holdings, how many mortgages issued from January 2006 to June 2007 met underwriting standards?


Answer: 23

Question: How many investment and commercial banks were included in Clayton Holdings' analysis of January 2006 to June 2007 loans?


Answer: 28%

Question: Per Clayton's analysis of loans issued from January 2006 to June 2007, what percent of loans did not meet minimal standards of any issuer?


Answer: 900,000

Question: How many mortgage loans did Clayton Holdings review in their analysis?


Answer: Predatory lending

Context: Predatory lending refers to the practice of unscrupulous lenders, enticing borrowers to enter into "unsafe" or "unsound" secured loans for inappropriate purposes. A classic bait-and-switch method was used by Countrywide Financial, advertising low interest rates for home refinancing. Such loans were written into extensively detailed contracts, and swapped for more expensive loan products on the day of closing. Whereas the advertisement might state that 1% or 1.5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer might not notice until long after the loan transaction had been consummated.

Question: What is the name for lending that entices borrowers to enter into unsafe secured loans?


Answer: Countrywide Financial

Question: What company used a classic bait-and-switch method by advertising low interest rates?


Answer: adjustable rate mortgage (ARM)

Question: Which type loan would the consumer be put into instead of the 1% or 1.5% interest rate loan as advertised?


Answer: negative amortization

Question: What was created when the interest charged was greater than the amount of interest paid?


Answer: classic bait-and-switch

Question: What type predatory lending method did Countrywide Financial use?


Answer: California Attorney General Jerry Brown

Context: Countrywide, sued by California Attorney General Jerry Brown for "unfair business practices" and "false advertising" was making high cost mortgages "to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments". When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared. This caused Countrywide's financial condition to deteriorate, ultimately resulting in a decision by the Office of Thrift Supervision to seize the lender.

Question: Who sued Countrywide for unfair business practices and false advertising?


Answer: adjustable rate mortgages (ARMs)

Question: What type mortgages allowed homeowners to make interest-only payments?


Answer: disappeared

Question: What happened to home equity when housing prices decreased?


Answer: Office of Thrift Supervision

Question: Who made the decision to seize Countrywide after their financial condition deteriorated?


Answer: weak credit

Question: What type credit did borrowers obtaining mortgages from Countrywide have?


Answer: Paul Krugman

Context: Critics such as economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner have argued that the regulatory framework did not keep pace with financial innovation, such as the increasing importance of the shadow banking system, derivatives and off-balance sheet financing. A recent OECD study suggest that bank regulation based on the Basel accords encourage unconventional business practices and contributed to or even reinforced the financial crisis. In other cases, laws were changed or enforcement weakened in parts of the financial system. Key examples include:

Question: What economist believed that regulations did not keep up with financial innovation?


Answer: Timothy Geithner

Question: Who was the U.S. Treasury Secretary dealing with the aftermath of the financial crisis of 2007?


Answer: OECD

Question: Which group's study suggested that Basel accords encourage unconventional business practices?


Answer: regulatory framework

Question: It has been argued that what did not keep up with financial innovation?


Answer: Basel

Question: What accords possibly contributed to or reinforced the financial crisis?


Answer: became highly leveraged

Context: Prior to the crisis, financial institutions became highly leveraged, increasing their appetite for risky investments and reducing their resilience in case of losses. Much of this leverage was achieved using complex financial instruments such as off-balance sheet securitization and derivatives, which made it difficult for creditors and regulators to monitor and try to reduce financial institution risk levels. These instruments also made it virtually impossible to reorganize financial institutions in bankruptcy, and contributed to the need for government bailouts.

Question: What did financial institutions do prior to the crisis?


Answer: complex

Question: What type financial instruments are off-balance sheet securitization and derivatives?


Answer: government

Question: Who bailed out financial institutions?


Answer: bankruptcy

Question: Which option was nearly impossible for financial institutions to reorganize under?


Answer: complex financial instruments

Question: What are the type financial instruments that were difficult for creditors and regulators to monitor?


Answer: five

Context: From 2004 to 2007, the top five U.S. investment banks each significantly increased their financial leverage (see diagram), which increased their vulnerability to a financial shock. Changes in capital requirements, intended to keep U.S. banks competitive with their European counterparts, allowed lower risk weightings for AAA securities. The shift from first-loss tranches to AAA tranches was seen by regulators as a risk reduction that compensated the higher leverage. These five institutions reported over $4.1 trillion in debt for fiscal year 2007, about 30% of USA nominal GDP for 2007. Lehman Brothers went bankrupt and was liquidated, Bear Stearns and Merrill Lynch were sold at fire-sale prices, and Goldman Sachs and Morgan Stanley became commercial banks, subjecting themselves to more stringent regulation. With the exception of Lehman, these companies required or received government support. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.

Question: How many U.S. investment banks significantly increased their financial leverage from 2004 to 2007?


Answer: financial shock

Question: U.S. investment banks Increased their financial leverage and also increased their vulnerability to what?


Answer: capital requirements

Question: Changes in what intended to keep U.S. banks competitive with their European counterparts?


Answer: over $4.1 trillion

Question: How much debt did the top five U.S. investment banks report in fiscal year 2007?


Answer: Lehman Brothers

Question: What financial institution went bankrupt and was liquidated in 2007?


Answer: saving more during adverse economic conditions

Context: Behavior that may be optimal for an individual (e.g., saving more during adverse economic conditions) can be detrimental if too many individuals pursue the same behavior, as ultimately one person's consumption is another person's income. Too many consumers attempting to save (or pay down debt) simultaneously is called the paradox of thrift and can cause or deepen a recession. Economist Hyman Minsky also described a "paradox of deleveraging" as financial institutions that have too much leverage (debt relative to equity) cannot all de-leverage simultaneously without significant declines in the value of their assets.

Question: What is an example of something that can be detrimental if too many individuals pursue the same behavior?


Answer: paradox of thrift

Question: What is it called when too many consumers attempt to save or pay down debt at the same time?


Answer: can cause or deepen a recession

Question: What will happen if too many consumers save or pay down debt simultaneously?


Answer: Hyman Minsky

Question: Who is the economist who described a "paradox of deleveraging"?


Answer: their assets

Question: Financial institutions cannot all de-leverage simultaneously without a decline in the value of this?


Answer: Janet Yellen

Context: During April 2009, U.S. Federal Reserve vice-chair Janet Yellen discussed these paradoxes: "Once this massive credit crunch hit, it didn’t take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy. Consumers are pulling back on purchases, especially on durable goods, to build their savings. Businesses are cancelling planned investments and laying off workers to preserve cash. And, financial institutions are shrinking assets to bolster capital and improve their chances of weathering the current storm. Once again, Minsky understood this dynamic. He spoke of the paradox of deleveraging, in which precautions that may be smart for individuals and firms—and indeed essential to return the economy to a normal state—nevertheless magnify the distress of the economy as a whole."

Question: Who was the U.S. Federal Reserve vice-chair in April 2009?


Answer: we were in a recession

Question: What happened soon after the massive credit crunch hit?


Answer: recession

Question: What deepened the credit crunch when demand and employment fell?


Answer: cancelling planned investments

Question: What was one of the actions businesses took to preserve cash?


Answer: balance sheet deleveraging

Question: What occurred in nearly every corner of the economy after the financial crisis of 2007?


Answer: financial innovation

Context: The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions.

Question: What term refers to the ongoing development of financial products?


Answer: adjustable-rate mortgage

Question: What is an example of financial innovation pertinent to the financial crisis?


Answer: CDS

Question: What is the abbreviation for a form of credit insurance called credit default swaps?


Answer: mortgage-backed securities (MBS)

Question: What is the financial innovation that bundles subprime mortgages?


Answer: expanded dramatically

Question: What happened to the usage of financial innovation products in the years leading up the financial crisis?


Answer: Q1 2007

Context: CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1 2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets. As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's became worthless.

Question: When did the issuance of CDO peak?


Answer: $20 billion

Question: What was the estimated value of CDO issuance in Q1 2004?


Answer: over $180 billion

Question: What was the estimated value of CDO issuance at it's peak in Q1 2007?


Answer: 36%

Question: What percent of CDO assets were subprime and other non-prime mortgage debt in 2007?


Answer: under $20 billion

Question: What was the estimated value of CDO issuance in Q1 2008?


Answer: innovative financial products

Context: This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this provided the ground for fraudulent acts, misjudgments and finally market collapse. In 2005 a group of computer scientists built a computational model for the mechanism of biased ratings produced by rating agencies, which turned out to be adequate to what actually happened in 2006–2008.[citation needed]

Question: Which products created more complexity in the financial markets?


Answer: multiplied the number of actors connected

Question: What effect did the introduction of innovative financial products have on a single mortgage?


Answer: indirect information

Question: What did institutions rely more on as increasing distance from underlying assets occurred?


Answer: computer models of rating agencies

Question: What is a type of indirect information that financial institutions and investors used to judge the risk?


Answer: 2005

Question: In what year did a group of computer scientists build a model for ratings produced by rating agencies that turned out to be accurate for what happened in 2006-2008?


Answer: interest rates or fees

Context: The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format.

Question: What is a measurement of pricing of risk?


Answer: pricing of risk

Question: What is the incremental compensation required by investors for taking on addition risk called?


Answer: lack of transparency about banks' risk exposures

Question: According to several scholars, what prevented markets from correctly pricing risk before the crisis?


Answer: straightforward, readily understandable format

Question: How should risk levels have been disclosed according to several scholars?


Answer: far more disruptive

Question: What was the outcome of the financial crisis since risk levels were not adequately disclosed?


Answer: risk inherent with financial innovation

Context: For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its impact on the overall stability of the financial system. For example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450bn of CDO were sold between "late 2005 to the middle of 2007"; among the $102bn of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar.

Question: What did market participants fail to measure accurately?


Answer: a variety of reasons

Question: What are the reasons market participants did not understand the impact financial innovation products would have?


Answer: approximately 32 cents on the dollar

Question: How much did JPMorgan estimate was the average recovery rate for high quality CDOs that had been liquidated?


Answer: approximately five cents for every dollar

Question: How much did JPMorgan estimate was the average recovery rate for mezzanine CDOs that had been liquidated?


Answer: $450bn

Question: How much did banks estimate was the value of CDOs sold between late 2005 to the middle of 2007?


Answer: AIG

Context: Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. U.S. taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions.

Question: What firm insured obligations of various financial institutions using credit default swaps?


Answer: credit default swaps

Question: What does the abbreviation CDS stand for?


Answer: September 2008

Question: When did the government take over AIG?


Answer: over $180 billion

Question: How much money did taxpayers provide in government support to AIG during 2008 and early 2009?


Answer: a premium

Question: What did AIG receive for promising to pay Party A in the event that Party B defaulted?


Answer: George Soros

Context: As financial assets became more and more complex, and harder and harder to value, investors were reassured by the fact that both the international bond rating agencies and bank regulators, who came to rely on them, accepted as valid some complex mathematical models which theoretically showed the risks were much smaller than they actually proved to be. George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility."

Question: Who commented that the super-boom got out of hand when products became so complicated that risk could not be accurately calculated?


Answer: more complex

Question: What happened to financial assets that made them harder to value?


Answer: the originators of synthetic products

Question: Who did rating agencies rely on for information to rate financial innovation products?


Answer: the banks

Question: When authorities could no longer calculate the risks of complex financial innovation products, who did they rely on for information?


Answer: international bond rating agencies

Question: Who reassured investors by showing the risk of complex financial innovation products was actually less than they proved to be?


Answer: World Scientific

Context: Despite the dominance of the above formula, there are documented attempts of the financial industry, occurring before the crisis, to address the formula limitations, specifically the lack of dependence dynamics and the poor representation of extreme events. The volume "Credit Correlation: Life After Copulas", published in 2007 by World Scientific, summarizes a 2006 conference held by Merrill Lynch in London where several practitioners attempted to propose models rectifying some of the copula limitations. See also the article by Donnelly and Embrechts and the book by Brigo, Pallavicini and Torresetti, that reports relevant warnings and research on CDOs appeared in 2006.

Question: Who published "Credit Correlation: Life After Copulas" in 2007?


Answer: 2006

Question: When did relevant warnings and research on CDOs appear in an article by Donnelly and Embrechts?


Answer: Merrill Lynch

Question: The volume "Credit Correlation: Life After Copulas" summarizes a 2006 conference held by what firm in London?


Answer: some of the copula limitations

Question: What did the volume "Credit Correlation: Life After Copulas" propose models to rectify?


Answer: 2006

Question: What year did the book by Brigo, Pallavicini and Torresetti report warnings and research on CDOs?


Answer: Timothy Geithner

Context: In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because of maturity mismatch, meaning that they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging, selling their long-term assets at depressed prices. He described the significance of these entities:

Question: Who was President and CEO of the New York Federal Reserve Bank in June 2008?


Answer: 2009

Question: What year did Timothy Geithner become U.S. Treasury Secretary?


Answer: "parallel" banking system

Question: In a June 2008 speech, Timoty Geithner placed blame for credit market freezing on which system?


Answer: shadow banking system

Question: What is the "parallel" banking system also called?


Answer: maturity mismatch

Question: What is the term defined as being vulnerable by borrowing short-term in liquid markets to purchase long-term illiquid and risky assets?


Answer: spring of 2007

Context: The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume." The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions."

Question: When did the securitization markets supported by the shadow banking systems start to close down?


Answer: fall of 2008

Question: When did the securitization markets supported by the shadow banking system nearly shut-down completely?


Answer: More than a third

Question: How much of the private credit markets become unavailable as a source of funds?


Answer: Brookings Institution

Question: What is the firm who reported that the traditional banking system does not have capital to close the gap as of June 2009?


Answer: a number of years

Question: How many years would of strong profit would it take to generate enough capital to support additional lending?


Answer: Mark Zandi

Context: Economist Mark Zandi testified to the Financial Crisis Inquiry Commission in January 2010: "The securitization markets also remain impaired, as investors anticipate more loan losses. Investors are also uncertain about coming legal and accounting rule changes and regulatory reforms. Private bond issuance of residential and commercial mortgage-backed securities, asset-backed securities, and CDOs peaked in 2006 at close to $2 trillion...In 2009, private issuance was less than $150 billion, and almost all of it was asset-backed issuance supported by the Federal Reserve's TALF program to aid credit card, auto and small-business lenders. Issuance of residential and commercial mortgage-backed securities and CDOs remains dormant."

Question: What economist testified to the Financial Crisis Inquiry Commission in January 2010?


Answer: securitization markets

Question: In January 2010, what markets did Mark Zandi testify about that remain impaired and investors anticipate more loan losses?


Answer: close to $2 trillion

Question: What was the value of CDOs at their peak in 2006?


Answer: less than $150 billion

Question: What was the private issuance of CDOs in 2009?


Answer: TALF

Question: Almost all of the asset-backed issuance in 2009 was supported by what Federal Reserve program?


Answer: Rapid increases

Context: Rapid increases in a number of commodity prices followed the collapse in the housing bubble. The price of oil nearly tripled from $50 to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008. Experts debate the causes, with some attributing it to speculative flow of money from housing and other investments into commodities, some to monetary policy, and some to the increasing feeling of raw materials scarcity in a fast-growing world, leading to long positions taken on those markets, such as Chinese increasing presence in Africa. An increase in oil prices tends to divert a larger share of consumer spending into gasoline, which creates downward pressure on economic growth in oil importing countries, as wealth flows to oil-producing states. A pattern of spiking instability in the price of oil over the decade leading up to the price high of 2008 has been recently identified. The destabilizing effects of this price variance has been proposed as a contributory factor in the financial crisis.

Question: Following the collapse in the housing bubble, what happened to a number of commodity prices?


Answer: nearly tripled from $50 to $147

Question: How much did the price of oil increase from early 2007 to 2008?


Answer: plunging

Question: What did the price of oil began doing when the financial crisis began to take hold in late 2008?


Answer: monetary policy

Question: What is one of the reasons experts believe contributed to the volatilaty in oil prices in 2008?


Answer: gasoline

Question: Consumers tend to have less money to spend on other goods, when the price of which commodity is higher?


Answer: Michael Greenberger

Context: In testimony before the Senate Committee on Commerce, Science, and Transportation on June 3, 2008, former director of the CFTC Division of Trading & Markets (responsible for enforcement) Michael Greenberger specifically named the Atlanta-based IntercontinentalExchange, founded by Goldman Sachs, Morgan Stanley and BP as playing a key role in speculative run-up of oil futures prices traded off the regulated futures exchanges in London and New York. However, the IntercontinentalExchange (ICE) had been regulated by both European and U.S. authorities since its purchase of the International Petroleum Exchange in 2001. Mr Greenberger was later corrected on this matter.

Question: Who was the former director of the CFTC that testified before the Senate Committee on Commerce, Science, and Transportation on June 3, 2008?


Answer: IntercontinentalExchange

Question: Who did Michael Greenberger erronesously name as a key player in speculative run-up of oil futures?


Answer: Goldman Sachs, Morgan Stanley and BP

Question: Who founded the Atlanta-based Intercontinental Exchange?


Answer: IntercontinentalExchange (ICE)

Question: Who purchased the International Petroleum Exchange in 2001?


Answer: London and New York

Question: Where are regulated future exchanges located?


Answer: Ailsa McKay

Context: Feminist economists Ailsa McKay and Margunn Bjørnholt argue that the financial crisis and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession. They argue that such a reshaping should include new advances within feminist economics and ecological economics that take as their starting point the socially responsible, sensible and accountable subject in creating an economy and economic theories that fully acknowledge care for each other as well as the planet.

Question: Who is one of the feminist economists that believe the financial crisis revealed a crisis of mainstream economics and call for a complete reshaping of the economy?


Answer: mainstream economics

Question: Feminist economists Ailsa McKay and Margunn Bjornhold believe that the financial crisis and response reveal a crisis of ideas in this?


Answer: feminist economics

Question: According to feminist economists McKay and Bjornholt, would type economics should be included in a reshaping?


Answer: a reshaping

Question: What do economists McKay and Bjornholt want to occur in the economy, economic theory, and economics profession?


Answer: Raghuram Rajan

Context: Current Governor of the Reserve Bank of India Raghuram Rajan had predicted the crisis in 2005 when he became chief economist at the International Monetary Fund.In 2005, at a celebration honouring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom." Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialise, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimised."

Question: Who was the current Governor of the Reserve Bank of India that predicted the crisis in 2005?


Answer: 2005

Question: When did Raghuram Rajan become chief economist the the International Monetary Fund?


Answer: at a celebration honouring Alan Greenspan

Question: In 2005, where did Rajan deliver a controversial paper that was critical of the financial paper?


Answer: "Has Financial Development Made the World Riskier?"

Question: What was the name of Raghuram Rajan's controversial paper delivered in 2005?


Answer: tail risks

Question: What are risks called that generate severe adverse consequences with small probability but generous compensation the rest of the time?


Answer: Raghuram Rajan

Context: The financial crisis was not widely predicted by mainstream economists except Raghuram Rajan, who instead spoke of the Great Moderation. A number of heterodox economists predicted the crisis, with varying arguments. Dirk Bezemer in his research credits (with supporting argument and estimates of timing) 12 economists with predicting the crisis: Dean Baker (US), Wynne Godley (UK), Fred Harrison (UK), Michael Hudson (US), Eric Janszen (US), Steve Keen (Australia), Jakob Brøchner Madsen & Jens Kjaer Sørensen (Denmark), Kurt Richebächer (US), Nouriel Roubini (US), Peter Schiff (US), and Robert Shiller (US). Examples of other experts who gave indications of a financial crisis have also been given. Not surprisingly, the Austrian economic school regarded the crisis as a vindication and classic example of a predictable credit-fueled bubble that could not forestall the disregarded but inevitable effect of an artificial, manufactured laxity in monetary supply, a perspective that even former Fed Chair Alan Greenspan in Congressional testimony confessed himself forced to return to.

Question: Who was one of the only mainstream economist to predict the financial crisis?


Answer: Great Moderation

Question: What did Raghuram Rajan speak of?


Answer: Dirk Bezemer

Question: Who credit 12 heterodox economists with predicting the crisis in his research credits?


Answer: as a vindication

Question: How did the Austrian economic school regard the crisis?


Answer: Alan Greenspan

Question: Which former Fed Chair confessed in Congressional testimony to being forced to return to lax monetary supply?


Answer: BusinessWeek

Context: A cover story in BusinessWeek magazine claims that economists mostly failed to predict the worst international economic crisis since the Great Depression of the 1930s. The Wharton School of the University of Pennsylvania's online business journal examines why economists failed to predict a major global financial crisis. Popular articles published in the mass media have led the general public to believe that the majority of economists have failed in their obligation to predict the financial crisis. For example, an article in the New York Times informs that economist Nouriel Roubini warned of such crisis as early as September 2006, and the article goes on to state that the profession of economics is bad at predicting recessions. According to The Guardian, Roubini was ridiculed for predicting a collapse of the housing market and worldwide recession, while The New York Times labelled him "Dr. Doom".

Question: Which magazine ran a cover story claiming that most economists failed to the the financial crisis?


Answer: Great Depression

Question: The financial crisis of 2007 was the worst economic crisis since which crisis that occurred in the 1930s?


Answer: The Wharton School

Question: Which school at University of Pennsylvania examined in their online business journal why economists failed to predict the crisis?


Answer: Nouriel Roubini

Question: Which economist did the New York Times state warned of a crisis as early as September 2006?


Answer: "Dr. Doom"

Question: What was economist Roubini called by the New York Times for predicting a collapse of the housing market?


Answer: Nassim Nicholas Taleb

Context: Stock trader and financial risk engineer Nassim Nicholas Taleb, author of the 2007 book The Black Swan, spent years warning against the breakdown of the banking system in particular and the economy in general owing to their use of bad risk models and reliance on forecasting, and their reliance on bad models, and framed the problem as part of "robustness and fragility". He also took action against the establishment view by making a big financial bet on banking stocks and making a fortune from the crisis ("They didn't listen, so I took their money"). According to David Brooks from the New York Times, "Taleb not only has an explanation for what’s happening, he saw it coming."

Question: Who wrote the 2007 book The Black Swan?


Answer: David Brooks

Question: What journalist from the New York Times stated his believe in Nassim Nicholas Taleb?


Answer: the breakdown of the banking system

Question: What did Nassim Nicholas Taleb warn about for years prior to the financial crisis of 2007?


Answer: banking stocks

Question: What did Nassim Nicholas Taleb make a fortune on by making a big financial bet?


Answer: Phil Dow

Context: Market strategist Phil Dow believes distinctions exist "between the current market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow. Floyd Norris, the chief financial correspondent of The New York Times, wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the time, the rates of decline had started much faster in 2007, and that the past year had only ranked eighth among the worst recorded years of percentage drops in the Dow. The past two years ranked third, however.

Question: Who is the market strategist that believes distinctions exist between the current crisis and the Great Depression?


Answer: 50%

Question: How much did the Dow Jones average fall during a period of 17 months?


Answer: 54.7%

Question: What was the percentage the Dow Jones fell in the Great Depression?


Answer: Floyd Norris

Question: Who was the chief financial correspondent of The New York Times in March 2009?


Answer: Northern Rock

Context: One of the first victims was Northern Rock, a medium-sized British bank. The highly leveraged nature of its business led the bank to request security from the Bank of England. This in turn led to investor panic and a bank run in mid-September 2007. Calls by Liberal Democrat Treasury Spokesman Vince Cable to nationalise the institution were initially ignored; in February 2008, however, the British government (having failed to find a private sector buyer) relented, and the bank was taken into public hands. Northern Rock's problems proved to be an early indication of the troubles that would soon befall other banks and financial institutions.

Question: Which medium sized British bank was the first victim of the financial crisis?


Answer: Bank of England

Question: Who did Northern Rock request security from?


Answer: September 2007

Question: When did Northern Rock investors panic and a bank run begin?


Answer: February 2008

Question: When was Northern Rock taken into public hands?


Answer: Northern Rock

Question: Which bank early problems in 2007 were an indicator of the troubles that would soon befall other banks and financial institutions?


Answer: the borrower’s income

Context: IndyMac often made loans without verification of the borrower’s income or assets, and to borrowers with poor credit histories. Appraisals obtained by IndyMac on underlying collateral were often questionable as well. As an Alt-A lender, IndyMac’s business model was to offer loan products to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans, and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments. The thrift remained profitable only as long as it was able to sell those loans in the secondary mortgage market. IndyMac resisted efforts to regulate its involvement in those loans or tighten their issuing criteria: see the comment by Ruthann Melbourne, Chief Risk Officer, to the regulating agencies.

Question: IndyMac often made loans without verifying what?


Answer: Appraisals

Question: What was questionable on IndyMac's underlying collateral?


Answer: poor

Question: IndyMac gave loans to borrower's with what type credit histories?


Answer: risky

Question: IndyMac offered this type of questionable loans to borrowers?


Answer: issuing criteria

Question: IndyMac resisted efforts by regulators to tighten this criteria of their loans?


Answer: half

Context: Typical American families did not fare as well, nor did those "wealthy-but-not wealthiest" families just beneath the pyramid's top. On the other hand, half of the poorest families did not have wealth declines at all during the crisis. The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63 percent of all Americans declined in that period. 77 percent of the richest families had a decrease in total wealth, while only 50 percent of those on the bottom of the pyramid suffered a decrease.

Question: How many of the poorest families did not have any wealth decline during the financial crisis?


Answer: 63

Question: In a Federal Reserve survey of 4,000 households, what percent reported wealth decline between 2007 and 2009?


Answer: 77

Question: How many of the richest families had a decrease in total wealth between 2007 and 2009?


Answer: 50

Question: How many families at the bottom of the pyramid had a decrease in total wealth between 2007 and 2009?


Answer: poorest families

Question: Which families experienced the least decline in wealth between 2007 and 2009?


Answer: European Commission at Brussels

Context: On November 3, 2008, the European Commission at Brussels predicted for 2009 an extremely weak growth of GDP, by 0.1%, for the countries of the Eurozone (France, Germany, Italy, Belgium etc.) and even negative number for the UK (−1.0%), Ireland and Spain. On November 6, the IMF at Washington, D.C., launched numbers predicting a worldwide recession by −0.3% for 2009, averaged over the developed economies. On the same day, the Bank of England and the European Central Bank, respectively, reduced their interest rates from 4.5% down to 3%, and from 3.75% down to 3.25%. As a consequence, starting from November 2008, several countries launched large "help packages" for their economies.

Question: On November 3, 2008, who predicted extremely weak GDP growth for the Eurozone in 2009?


Answer: 0.1%

Question: How much did the European Commission estimate the GDP growth for Eurozone countries would be in 2009?


Answer: −1.0%

Question: How much did the European Commission estimate the GDP growth for the UK would be in 2009?


Answer: the IMF

Question: On November 6, in Washington, D.C., who predicted a worldwide recession for 2009?


Answer: 3%

Question: On November 5, 2008, the Bank of England reduced their interest rate from 4.5% to what?


Answer: expand money supplies

Context: The U.S. Federal Reserve and central banks around the world have taken steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment lead to a self-reinforcing decline in global consumption. In addition, governments have enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The U.S. Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with access to liquidity, and increasing the flexibility with which institutions could tap such liquidity.

Question: What have central banks around the world done to avoid the risk of a deflationary spiral?


Answer: enacted large fiscal stimulus packages

Question: What have governments done to offset the reduction in private sector demand?


Answer: lender-of-last-resort

Question: What is the U.S. Federal Reserve's traditional role during a crisis?


Answer: expanded liquidity facilities

Question: What did the U.S. Federal Reserve do to increase access to liquidity?


Answer: self-reinforcing decline

Question: What type decline does lower wages and higher unemployment lead to?


Answer: credit freeze

Context: This credit freeze brought the global financial system to the brink of collapse. The response of the Federal Reserve, the European Central Bank, the Bank of England and other central banks was immediate and dramatic. During the last quarter of 2008, these central banks purchased US$2.5 trillion of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action, in world history. Following a model initiated by the United Kingdom bank rescue package, the governments of European nations and the USA guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $1.5 trillion newly issued preferred stock in their major banks. In October 2010, Nobel laureate Joseph Stiglitz explained how the U.S. Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap. By creating $600 billion and inserting[clarification needed] this directly into banks, the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas by investing internationally in emerging markets. Banks were also investing in foreign currencies, which Stiglitz and others point out may lead to currency wars while China redirects its currency holdings away from the United States.

Question: What brought the global financial system to the brink of collapse?


Answer: US$2.5 trillion

Question: How much government debt and troubled private assets did central banks purchase during the last quarter of 2008?


Answer: $1.5 trillion

Question: How much preferred stock did governments of European nations and the USA purchase in their major banks?


Answer: Joseph Stiglitz

Question: In October 2010, who was the Nobel laureate that explained how the U.S. Federal Reserve was creating currency to combat the liquidity trap?