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

The greatest crisis facing many Americans is their increasing inability to meet their monthly mortgage payments.

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

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

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

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.

The crisis spread because the banking system was not sufficiently risk averse and in some cases even seemed to relish risk. Mortgage banks kept some claims on their books, but sold most of them to investment banks as mortgage backed securities.

So I think that the oil blowout, the bank bailout, the mortgage crisis and all these things are absolutely symptoms of the same cause.

So, if there is a debt problem, as in the US mortgage crisis, one must also look at private funds role in creating it.

Public policies to subsidize US mortgage lending have been costly, inefficient, and have encouraged excessive risk taking, which helped push the system toward crisis.

Even mortgage backed securities, which were at the center of the financial crisis that erupted in 2008, have important uses in spreading home and auto ownership.

Occupy the Mortgage Lenders

So its failure to press the United States to redress the mortgage market vulnerabilities that precipitated the current financial crisis indicates that much remains to be done.

Consider the following. The financial crisis erupted in 2008 when mortgage backed securities were revalued at much less than what they had been thought to be worth.

Policy enhancements have been made to mortgage portability, second homes and mortgage qualification for self employed borrowers.

In the current crisis, even the private rating agencies dramatically underestimated the risks involved, which helped lure international financial investors into purchasing mortgage backed securities at exaggerated prices.

The Right Weights for Mortgage Risks

His reappearance comes just as the credit bubble fueled by the sub prime mortgage boom is about to burst, triggering the worst financial and economic crisis since the Great Depression.

After all, when the global financial crisis erupted in 2008 from the bowels of the American subprime mortgage market, global investors responded by fleeing to the US, not from it.

In Europe, we by and large failed to heed the warning signals of America s sub prime mortgage crisis when it erupted in the late summer of 2007, and thus were unprepared when the next phase of the crisis engulfed European banks, too.

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.

Mortgage debts, too, must be written down.

Declining house prices are key to the financial crisis and the outlook for the economy, because mortgage backed securities, and the derivatives based on them, are the primary assets that are weakening financial institutions.

The fires of the US sub prime mortgage crisis were stoked not just by domestic regulatory failures, but also by a global saving glut, which sent banks on a wild goose chase for yield.

So Europeans should not be tempted to think that they are somehow decoupled from America s foibles and woes. Until recently, many Europeans thought they were insulated from the current US housing and mortgage crisis.

Globalization implies that America s mortgage problem has worldwide repercussions.

But mortgage markets remain underdeveloped in most emerging economies.

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.

Likewise, the problem was not mentioned in one of the IMF s flagship publications, the Global Financial Stability Report (GFSR), in September 2006, just ten months before the sub prime mortgage crisis became apparent to all.

As a result, mortgage brokers maximize their income by generating larger volumes of mortgages, as do the banks that package these loans into mortgage backed securities (MBS s).

Mortgage brokers were happy to get in on the act.

Some limited previous experience with mortgage modifications is not encouraging.

It may make sense for central banks (or Fannie Mae, America s major government sponsored mortgage company) to buy mortgage backed securities in order to help provide market liquidity.

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.

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.

Through mortgage loan insurance, homeowners have access to the lowest possible mortgage rates with a down payment as low as five percent, permitting more Canadian households access to homeownership.

But, in America s home mortgage market, this is much less common.

2000 2004 Alfa Bank, Director of the Department of Mortgage Operations

CHICAGO Before the recent financial crisis, politicians on both sides of the aisle in the United States egged on Fannie Mae and Freddie Mac, the giant government backed mortgage agencies, to support low income lending in their constituencies.

Such products should appeal to homebuyers when the mortgage is first issued.

But that is precisely why a government managed mortgage market is dangerous.

When home prices were soaring, the geniuses behind mortgage finance seemed infallible.

The prices of traded mortgage backed securities have followed house prices down.