U.S. Monetary Policy Forum Releases 2008 Report

Lessons From the Mortgage Market Meltdown: U.S. Monetary Policy Forum Releases 2008 Report

CHICAGO & WALTHAM, Mass.-February 29, 2008--The U.S. Monetary Policy Forum, an annual conference that brings together academics, market economists and Federal Reserve policymakers to discuss U.S. monetary policy, today released its 2008 report on matters confronting the Federal Open Market Committee (FOMC).

The report, entitled "Leveraged Losses: Lessons from the Mortgage Market Meltdown" is available at two websites: http://www.brandeis.edu/ibs/monetarypolicy and http://research.chicagogsb.edu/igm/events/conferences/2008-usmonetaryforum.aspx.

"This year's report aims to draw some lessons from the recent credit market crisis for central bankers," said Anil Kashyap, a professor of economics and finance at the University of Chicago Graduate School of Business and co-director of the Forum.

The report characterizes the disruptions in the financial markets and compares these dislocations to previous periods of financial stress. It confirms the view that the current problems in financial markets are concentrated in institutions that have exposure to mortgage securities and uses several methods to estimate the ultimate losses on these securities. The best guess is that the losses will total about $400 billion, with about half being borne by leveraged financial institutions. The report explores the feedback from credit availability to the broader economy and provides new evidence that contractions in financial institutions balance sheets' cause a reduction in real GDP growth.

The report was prepared by David Greenlaw, chief U.S. fixed income economist, Morgan Stanley, Jan Hatzius, chief U.S. economist, Goldman Sachs, Anil Kashyap, professor of economics and finance, The University of Chicago Graduate School of Business, and Hyun Shin, professor of economics, Princeton University.

The U.S. Monetary Policy Forum conference is sponsored by the Rosenberg Institute of Global Finance at the Brandeis International Business School, and the Initiative on Global Markets at the University of Chicago Graduate School of Business.

Contact

Brandeis International Business School
Matthew Parillo, 781-736-5206
parillo@brandeis.edu