So far, the sub prime crisis has had a limited direct impact on Latin America s mortgage markets.

The sub prime crisis has exposed serious problems that we must address.

After the subprime crisis erupted, mortgage and consumer debt was paid down by households either with their savings or by default.

In this way, the Fed contributed to creating the sub prime crisis.

The sub prime crisis in the early summer of 2007 developed first into a financial crisis and ultimately into a recession.

Gambling by Main Street caused the sub prime crisis.

They might also hope for a housing program that finally addresses America s foreclosure crisis.

In America in the wake of the sub prime mortgage crisis, it has done neither.

This means that the biases that lead investors to do badly, that lead to the foreclosure crisis are going to be really hard to overcome.

It is worth remembering that the same thing happened in August 2007, when the sub prime crisis erupted.

After the sub prime mortgage crisis, politicians alleged that the market was short sighted and irrational, and rushed to propose new regulations.

The sub prime mortgage crisis has shown how lack of international coordination and regulation can exacerbate the inherent fragility of financial markets.

The mortgage crisis and the credit crunch have led to bailouts for the banks and the nationalization of housing finance and insurance.

But, between the sub prime US mortgage crisis and the dollar s ongoing decline, America s exorbitant privilege now looks a bit shaky.

Indeed, the sub prime crisis has made the European financial system look just as vulnerable as that of the US.

In the sub prime crisis, a similar phenomenon was implicitly at work, with banks speculating that they were too big for governments to let them fail.

BRUSSELS Back in 2007 2008, when the financial crisis was still called the subprime crisis, Europeans felt superior to the United States.

We saw this in the summer of 2007, when the subprime crisis erupted, and again in 2008, following the collapse of Lehman Brothers.

The sub prime crisis has exposed serious problems that we must address. For example, we need stronger consumer protection for retail financial products, stricter disclosure requirements for new securities, and better designed vehicles for hedging risks.

Are these skeptics right? Should we halt financial liberalization and innovation in order to prevent crises like the sub prime disaster from recurring?

Coming so shortly on the heels of the subprime crisis, the debate over the debt ceiling and the budget deficit is the last straw.

In the aftermath of the subprime crisis and the collapse of Lehman Brothers, fingers were pointed at the United States as an example of how badly things could go wrong.

As economic deregulation increased, financial crises began erupting since 1990, there have been three distinct crises in Latin America, one each in Russia and Asia, the Internet bubble, and now the sub prime crisis.

For example, during the housing bust in the United States in the late 1980 s, many banks that were mortgage lenders (the Savings ampamp Loans Associations) went belly up, leading to a banking crisis, a credit crunch, and a recession in 1990 1991.

Europe and the United States are both entering recession, and fears are mounting that the financial meltdown accompanying the sub prime mortgage debacle has not worked itself out.

Professor Carmen Reinhart of the University of Maryland and I systematically compared the run up to the US sub prime crisis with the run up to the 19 worst financial crises in the industrialized world over the past 60 years.

Munich After the 1982 debt crisis, the Savings Loan crisis in the United States in the late 1980 s, and the Asian financial crisis of 1997, the sub prime mortgage crisis is the fourth major banking crisis since World War II, and by far the biggest. According to the IMF, the total loss in terms of balance sheet write offs will be nearly 1 trillion worldwide, of which the lion s share probably will be borne by US financial institutions.

CAMBRIDGE The sub prime mortgage crisis has demonstrated once again how hard it is to tame finance, an industry that is both the lifeline of modern economies and their gravest threat.

When the sub prime crisis erupted in early September 2007, I published an article entitled Why Now is a Good Time to Sell the Dollar in a prominent financial publication.

And because we started this work around the time of the financial collapse, around the time when foreclosures were hitting the news, we said, hhmm, maybe we should actually start in the financial domain.

Americans don t seem to realize that their sub prime mortgage meltdown has all too much in common with many previous post 1945 banking crises throughout the world.

The housing recession the worst in US history and worsening every day will eventually see house prices fall by more than 20 , with millions of Americans losing their homes.

Today s crisis started in rich industrial countries not only with sub prime mortgages in the United States, but also with mismanagement of banks and public debt in Europe.

In August 2007, some German banks, at the earliest signs of difficulty because of their exposure to US sub prime mortgages, started to talk only of 1931.

If nothing nasty happens losses on mortgages, commercial real estate, business loans, and credit cards the banks might just be able to make it through without another crisis.

Against the backdrop of the sub prime crisis, the disasters at many financial institutions, and the weakening of the stock market, these masters of the universe seemed less omniscient than they did a short while ago.

But the large scale destruction of financial assets because of underlying uncertainty about the extent of losses in the wake of the sub prime crisis, and especially after the bankruptcy of Lehman Brothers, shook that assumption.

And, as the editorialists hasten to remind us, the downside is especially large at a time when the world s financial system is reeling under the sub prime mortgage crisis and the United States is entering a recession.

Never mind the subprime crisis of August 2007 or, closer to home, the European monetary crisis of August 1992 the August holiday is a venerable tradition.

Hit by a second external demand shock in three years first, America s subprime crisis, and now Europe s sovereign debt crisis any outbreak of internal political instability would pose a far greater threat than might otherwise be the case.

As the US and Europe lower interest rates to try to revive their economies and calm financial markets, the most significant impact of the sub prime mortgage crisis for Latin America may turn out to be inflation.

The Right Weights for Mortgage Risks

Occupy the Mortgage Lenders

Losses are spreading from sub prime to near prime and prime mortgages, commercial mortgages, and unsecured consumer credit (credit cards, auto loans, student loans).

Beyond the sub prime crisis, concerns about the US financial system s stability carry serious implications for the global economy.