romikgosai/squad_modified_2 huggingface dataset:
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.

Q1: Who led global economic growth after the financial crisis?
A1: "emerging" and "developing" economies
Q2: How much global GDP did emerging and developing economies account for from 2007 to 2014?
A2: 69%
Q3: What relationship between advanced and emerging/developing was completely overturned by the financial crisis of 2007?
A3: global economic growth
Q4: How much global GDP did "advanced" economies account for from 2007 to 2014?
A4: 31%
Q5: What economies led global economic growth prior to the financial crisis?
A5: Advanced economies
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:

Q1: Who believed that the growth of the commercial real estate bubble indicated that U.S. housing policy was not the cause of the crisis?
A1: Krugman
Q2: When did Xudong An and Anthony B. Sanders issue a report about commercial mortgage-backed securities?
A2: December 2010
Q3: According to business journalist Kimberly Amadeo, when did the first signs of decline in real estate occur?
A3: 2006
Q4: What are CMBS?
A4: commercial mortgage-backed securities
Q5: According to most analysts, what crisis took place after the crisis in residential real estate?
A5: the crisis in commercial real estate
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.

Q1: What is one investment assigned safe ratings by the credit rating agencies?
A1: collateralized debt obligation
Q2: How much was invested worldwide in fixed income investments?
A2: $70 trillion
Q3: How much did the pool of money invested worldwide in fixed income investments grow in size from 2000 to 2007?
A3: roughly doubled in size
Q4: What is an example of a product Wall Street invented to answer the demand for income generating investments?
A4: mortgage-backed security
Q5: In the 2000s, investors were seeking higher yields than those offered by this investment?
A5: U.S. Treasury bonds
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.

Q1: What is the name of the securities that enabled financial institutions to obtain investor funds to finance subprime?
A1: collateralized debt obligation
Q2: What was the outcome of collateralized debt obligations?
A2: extending or increasing the housing bubble
Q3: What type ratings did securities first in line receive from rating agencies?
A3: investment-grade ratings
Q4: What type pool do collateralized debt obligations place their payments from mortgages into?
A4: single pool
Q5: What securities had lower credit ratings but potentially a higher rate of return?
A5: Securities with lower priority
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%.

Q1: How much had average U.S. housing prices declined by September 2008?
A1: over 20%
Q2: When was the peak of U.S. housing prices?
A2: mid-2006
Q3: How many foreclosure proceedings were initiated by lenders in 2007?
A3: nearly 1.3 million
Q4: What was the percentage increase on foreclosure proceedings from 2007 to 2008?
A4: 81%
Q5: How many U.S. mortgages were either delinquent or in foreclosure by September 2009?
A5: 14.4%
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.

Q1: Was was the federal funds rate target lowered to by the Federal Reserve in 2003?
A1: 1.0%
Q2: What is one reason the Federal Reserve lowered the federal funds rate target to 1.0% in 2003?
A2: to combat a perceived risk of deflation
Q3: In the early 2000s, what type bubble did some economists believe the Fed needed to create to replace the Nasdaq bubble?
A3: a housing bubble
Q4: What contributed greatly to the severity of the financial crisis of 2007?
A4: excessive credit growth
Q5: What encouraged borrowing from 2000 to 2003?
A5: Lower interest rates
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.

Q1: Per Bernanke, how much did the U.S. current account deficit increase between 1996 and 2004?
A1: $650 billion
Q2: What percentage of GDP was the U.S. current account deficit in 2004?
A2: 5.8%
Q3: What emerging economies did the U.S. borrow money from between 1996 and 2004 to finance its imports?
A3: Asia and oil-exporting nations
Q4: What type account is needed by the U.S. to balance an account deficit?
A4: capital account
Q5: Where did the U.S. obtain capital to finance its imports?
A5: foreign funds
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.

Q1: When did the Fed begin raising Fed funds rate significantly?
A1: July 2004
Q2: What does ARM stand for:
A2: adjustable-rate mortgage
Q3: How do asset prices generally move in relation to interest rates?
A3: inversely
Q4: Beginning in July 2004, what did the Fed do to make ARM rates more expensive for homeowners?
A4: raised the Fed funds rate
Q5: How did U.S. housing and financial assets react to the housing bubble burst?
A5: dramatically declined in value
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".

Q1: Richard M. Bowen III testified to the Financial Crisis Inquiry Commission regarding his tenure at which financial institution?
A1: Citigroup
Q2: How many underwriters was Richard M. Bowen III responsible for at Citigroup?
A2: 220
Q3: What percent of mortgages purchased by Citigroup in 2006 were defective?
A3: 60%
Q4: In 2006, how many mortgage companies were contractually responsible to meet Citi's standards?
A4: 1,600
Q5: During 2007, what was the percent of defective mortgages not underwritten to Citi's standards?
A5: over 80%
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.

Q1: Who was the largest residential loan due diligence and securitization surveillance company?
A1: Clayton Holdings
Q2: According to Clayton Holdings, how many mortgages issued from January 2006 to June 2007 met underwriting standards?
A2: 54%
Q3: How many investment and commercial banks were included in Clayton Holdings' analysis of January 2006 to June 2007 loans?
A3: 23
Q4: 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?
A4: 28%
Q5: How many mortgage loans did Clayton Holdings review in their analysis?
A5: 900,000
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.

Q1: What is the name for lending that entices borrowers to enter into unsafe secured loans?
A1: Predatory lending
Q2: What company used a classic bait-and-switch method by advertising low interest rates?
A2: Countrywide Financial
Q3: Which type loan would the consumer be put into instead of the 1% or 1.5% interest rate loan as advertised?
A3: adjustable rate mortgage (ARM)
Q4: What was created when the interest charged was greater than the amount of interest paid?
A4: negative amortization
Q5: What type predatory lending method did Countrywide Financial use?
A5: classic bait-and-switch
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.

Q1: Who sued Countrywide for unfair business practices and false advertising?
A1: California Attorney General Jerry Brown
Q2: What type mortgages allowed homeowners to make interest-only payments?
A2: adjustable rate mortgages (ARMs)
Q3: What happened to home equity when housing prices decreased?
A3: disappeared
Q4: Who made the decision to seize Countrywide after their financial condition deteriorated?
A4: Office of Thrift Supervision
Q5: What type credit did borrowers obtaining mortgages from Countrywide have?
A5: weak credit
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:

Q1: What economist believed that regulations did not keep up with financial innovation?
A1: Paul Krugman
Q2: Who was the U.S. Treasury Secretary dealing with the aftermath of the financial crisis of 2007?
A2: Timothy Geithner
Q3: Which group's study suggested that Basel accords encourage unconventional business practices?
A3: OECD
Q4: It has been argued that what did not keep up with financial innovation?
A4: regulatory framework
Q5: What accords possibly contributed to or reinforced the financial crisis?
A5: Basel
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.

Q1: What did financial institutions do prior to the crisis?
A1: became highly leveraged
Q2: What type financial instruments are off-balance sheet securitization and derivatives?
A2: complex
Q3: Who bailed out financial institutions?
A3: government
Q4: Which option was nearly impossible for financial institutions to reorganize under?
A4: bankruptcy
Q5: What are the type financial instruments that were difficult for creditors and regulators to monitor?
A5: complex financial instruments
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.

Q1: How many U.S. investment banks significantly increased their financial leverage from 2004 to 2007?
A1: five
Q2: U.S. investment banks Increased their financial leverage and also increased their vulnerability to what?
A2: financial shock
Q3: Changes in what intended to keep U.S. banks competitive with their European counterparts?
A3: capital requirements
Q4: How much debt did the top five U.S. investment banks report in fiscal year 2007?
A4: over $4.1 trillion
Q5: What financial institution went bankrupt and was liquidated in 2007?
A5: Lehman Brothers
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.

Q1: What is an example of something that can be detrimental if too many individuals pursue the same behavior?
A1: saving more during adverse economic conditions
Q2: What is it called when too many consumers attempt to save or pay down debt at the same time?
A2: paradox of thrift
Q3: What will happen if too many consumers save or pay down debt simultaneously?
A3: can cause or deepen a recession
Q4: Who is the economist who described a "paradox of deleveraging"?
A4: Hyman Minsky
Q5: Financial institutions cannot all de-leverage simultaneously without a decline in the value of this?
A5: their assets
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."

Q1: Who was the U.S. Federal Reserve vice-chair in April 2009?
A1: Janet Yellen
Q2: What happened soon after the massive credit crunch hit?
A2: we were in a recession
Q3: What deepened the credit crunch when demand and employment fell?
A3: recession
Q4: What was one of the actions businesses took to preserve cash?
A4: cancelling planned investments
Q5: What occurred in nearly every corner of the economy after the financial crisis of 2007?
A5: balance sheet deleveraging
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.

Q1: What term refers to the ongoing development of financial products?
A1: financial innovation
Q2: What is an example of financial innovation pertinent to the financial crisis?
A2: adjustable-rate mortgage
Q3: What is the abbreviation for a form of credit insurance called credit default swaps?
A3: CDS
Q4: What is the financial innovation that bundles subprime mortgages?
A4: mortgage-backed securities (MBS)
Q5: What happened to the usage of financial innovation products in the years leading up the financial crisis?
A5: expanded dramatically
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.

Q1: When did the issuance of CDO peak?
A1: Q1 2007
Q2: What was the estimated value of CDO issuance in Q1 2004?
A2: $20 billion
Q3: What was the estimated value of CDO issuance at it's peak in Q1 2007?
A3: over $180 billion
Q4: What percent of CDO assets were subprime and other non-prime mortgage debt in 2007?
A4: 36%
Q5: What was the estimated value of CDO issuance in Q1 2008?
A5: under $20 billion