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dc.contributor.authorKotak, Akshay
dc.descriptionThe Tower is an official publication of the Georgia Tech Board of Student Publications and is sponsored by the Undergraduate Research Opportunities Program and the Price Gilbert Memorial Library System. This article is from Volume 2.en_US
dc.description.abstractThis paper addresses one of the major causes of the sub-prime mortgage crisis prevalent in large American mortgage houses by the end of 2006. The moral hazard scenario and consequent malpractices are addressed with respect to the soft budget constraint. This analysis is done by first looking at the Dewatripont and Maskin model (1995), and then suitably modifying it to model the scenario at a typical mortgage lender. This simplistic model provides useful insight into how heightened bailout expectations, caused by precedent actions by the Federal Reserve, fueled risky behavior at banks who thought themselves to be "too-large-to-fail."en_US
dc.description.sponsorshipUndergraduate Research Opportunities Program ; Price Gilbert Memorial Library System.en_US
dc.publisherGeorgia Institute of Technologyen_US
dc.relation.ispartofseriesThe Tower. Volume 2en_US
dc.subjectSub-prime mortgage crisisen_US
dc.subjectMortgage lendersen_US
dc.titleMoral Hazard and the Soft Budget Constraint: A game-theoretic look at the primal cause of the sub-prime mortgage crisisen_US
dc.description.advisorEmilson C. Silva, School of Economics, Georgia Institute of Technology

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  • The Tower [38]
    The Undergraduate Research Journal of the Georgia Institute of Technology

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