Risks and regulations of Financial Crisis of 2007–2009

This article is about the series of financial market events, starting in July 2007, which were the proximate cause of a weakening of the global economy. For details on the stock market crashes and bank bailouts of late 2008, see Global financial crisis of 2008–2009. For economic issues beyond the financial markets, see Late 2000s recession. For discussions of major aspects of the policy response to the crisis, see The Keynesian Resurgence of 2008 / 2009 and 2009 G-20 London summit.

As financial assets became more and more complex, and harder and harder to value, investors were reassured by the fact that both the international bond rating agencies and bank regulators, who came to rely on them, accepted as valid some complex mathematical models which theoretically showed the risks were much smaller than they actually proved to be in practice [34]. George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility." [35]