THE SUBPRIME MESS: INCENTIVES THAT HELP

Jim Shoe

SEMINAR MANAGEMENT CONTROL SYSTEMS



INTRODUCTION

The subprime crisis can be described as a series of events with the so-called

‘savings glut’ as Ben Bernanke described as a starting point. Low interest rates and

rising house prices created an opportunity for financial innovation. Credit quality

mattered little because if a buyer couldn’t make the payment, the lender would repossess

the house and sell it quickly in a hot market. When rates started to climb, lenders began

to increase the volume of exotic loans to keep buyers coming. When repossessed houses

couldn’t sell so easily, the credit quality of buyers did matter. The result was a subprime

crisis.

OBJECTIVES

The objective was to examine the management of financial services industry and

determine the role incentives play in its success and failure. Specifically, we determined

whether key management......

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Title: The Subprime Mess: Incntives That Help
Approximate Word Count: 1566
Approximate Pages: 7 (250 words per double-spaced page)

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