The Nippon Foundation Fellowships for Asian Public Intellectuals


Speaker:  Dr. Lim Mah Hui

Old Wine in New Bottle: Subprime Mortgage Crisis Causes and Consequences

April 21, 2008, 13:30-15:00

K307 CSEAS, Kyoto University

Prof. Shigeyuki Abe (Doshisha University)

This paper seeks to explain the causes and consequences of the U.S. subprime mortgage crisis and how this has led to a generalized credit crunch in other financial sectors that ultimately affects the real economy. It postulates that despite the recent financial innovations, the financial strategies that led to the present crisis are similar to those found in the U.S. savings and loans debacle of the late 80s and in the Asian financial crisis of late 90s. They are as the title implies: old wine in new bottle financial leveraging and funding mismatch. Going beyond these financial practices, the underlying structural causes of the crisis are located in the loose monetary policies of central banks, financial deregulation, and excess liquidity in financial markets that is a consequence of the kind of economic growth that produces various imbalances global current account imbalance, financial sector imbalance, and wealth and income imbalance. The consequences on risks, moral hazards and rolling bubbles are discussed. Comparison of similarities and differences with banking crises in Asia and Japan will be discussed.

Michael Lim Mah Hui taught political economy and sociology in various U.S. and Malaysian universities before he joined international banking. He has over twenty years experience as an investment, commercial, and development banker. He worked in Chemical Bank (now JP Morgan Chase), Credit Suisse First Boston, Deutsche and Asian Development Bank. He is now a senior fellow with the Asian Public Intellectual Program of the Nippon Foundation.