Case | HBS Case Collection | April 2009 (Revised June 2010)

U.S. Subprime Mortgage Crisis: Policy Reactions (B)

by Laura Alfaro and Renee Kim

Abstract

In March 2009, the U.S. economy was in a severe recession not seen since the Great Depression after the subprime mortgage crisis had spiraled out of control. The situation had dramatically changed in one year since the Federal Reserve Board had helped to bailout investment bank Bear Stearns. Deflation, not inflation, had become a top concern. Interest rates were near zero percent. Five million jobs had been lost. The new Barack Obama administration had pushed forward with a $787 billion stimulus package, coupled with various programs to address the frozen credit markets and depressed investors' confidence. Yet the burning question in every policymaker's mind was-how effective would the various plans work to revive the U.S. economy?

Keywords: Financial Crisis; Central Banking; Mortgages; Globalized Economies and Regions; Policy; United States;

Citation:

Alfaro, Laura, and Renee Kim. "U.S. Subprime Mortgage Crisis: Policy Reactions (B)." Harvard Business School Case 709-045, April 2009. (Revised June 2010.)