# Prolonged Low Interest Rates and Global Capital Inflows Created the Bubble: 42 Sourced Claims, Contested Facts & Evidence Loose Fed policy and a global savings glut kept borrowing cheap and inflated the housing bubble. Authors: david HTML: https://moyomap.com/maps/prolonged-low-interest-rates Markdown: https://moyomap.com/maps/prolonged-low-interest-rates.md License: HTML and markdown are for reading and citation. Bulk copying and AI training need a written license. See /terms and /developers#maps-data. Cite a claim as: MoyoMap, "Prolonged Low Interest Rates and Global Capital Inflows Created the Bubble: 42 Sourced Claims, Contested Facts & Evidence", claim {id}, https://moyomap.com/maps/prolonged-low-interest-rates.md#{id}. “Moyo, a product of SenTeGuard Inc.” ### The SEC's 2004 Consolidated Supervised Entity (CSE) program brought the holding companies of Lehman Brothers,… Id: claim_735e0279863660f78ba7c1ed Parent: topic_QPeoNc7inlytlG7P8ZZI Depth: 1 The SEC's 2004 Consolidated Supervised Entity (CSE) program brought the holding companies of Lehman Brothers, Bear Stearns, Goldman Sachs, Morgan Stanley, and Merrill Lynch under SEC supervision. Labels: Source-linked, Low, known ### Loose Federal Reserve monetary policy and the global savings glut fueled the asset bubble Id: claim_b4070827bcb56e05fc9e79d0 Parent: topic_QPeoNc7inlytlG7P8ZZI Depth: 1 The Federal Reserve kept the federal funds rate at 1.0 percent from June 2003 to June 2004, causing real short-term interest rates to remain negative and driving excessive credit expansion. Labels: Inferred, High, investigate ### AIG Liquidity Crisis and Derivatives Exposure Id: section_049b2b4fa81eb42a8d1fe11a Parent: topic_QPeoNc7inlytlG7P8ZZI Depth: 1 AIG Liquidity Crisis and Derivatives Exposure Labels: Inferred, Low ### FCIC Findings on Crisis Causes and Oversight Id: section_6ad3cff1673956c51bbcb5cd Parent: topic_QPeoNc7inlytlG7P8ZZI Depth: 1 FCIC Findings on Crisis Causes and Oversight Labels: Inferred, Low ### Failure and Lending Practices of Washington Mutual Id: section_8bdfd445ddca520e2b1ba916 Parent: topic_QPeoNc7inlytlG7P8ZZI Depth: 1 Failure and Lending Practices of Washington Mutual Labels: Inferred, Low ### Senate Levin-Coburn Investigation Id: section_ab7347a044b93a34693dcd60 Parent: topic_QPeoNc7inlytlG7P8ZZI Depth: 1 Senate Levin-Coburn Investigation Labels: Inferred, Low #### The national US housing price boom commenced in 2000, approximately three years before the 1% federal funds r… Id: claim_017a5e28941f4c861db86893 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 The national US housing price boom commenced in 2000, approximately three years before the 1% federal funds rate was implemented, rising almost 90% between 2000Q1 and 2006. Labels: Inferred, Low #### The only dissent at the June 2003 FOMC meeting came from Robert T. Id: claim_11caaade891f23dd870e849b Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 The only dissent at the June 2003 FOMC meeting came from Robert T. Parry, who advocated for a larger 50-basis-point rate cut rather than a tighter policy. Labels: Source-linked, Low #### AIG's collapse was triggered by credit rating downgrades from S&P (to A-), Moody's, and Fitch following Lehma… Id: claim_16c4881ae260e37f22a5ef18 Parent: section_049b2b4fa81eb42a8d1fe11a Depth: 2 AIG's collapse was triggered by credit rating downgrades from S&P (to A-), Moody's, and Fitch following Lehman Brothers' bankruptcy, which required billions in cash collateral for AIG Financial Products' credit default swaps. Labels: Inferred, Low, known #### The ratio of US residential mortgage debt to GDP increased from roughly 45% in 2000 to 75% at its peak in 200… Id: claim_28e3e2b6299d5dab533bfd3d Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 The ratio of US residential mortgage debt to GDP increased from roughly 45% in 2000 to 75% at its peak in 2008, continuing to accumulate after housing prices started to fall in 2006. Labels: Inferred, Low #### Kahn (2010) found that when Taylor rule deviations are excluded from a housing price forecasting equation, th… Id: claim_2b7e517e377bbcc3b9c744e0 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Kahn (2010) found that when Taylor rule deviations are excluded from a housing price forecasting equation, the housing bubble diminishes to a minor bump. Labels: Inferred, Low #### According to Taylor (1993), the actual federal funds rate deviated by as much as 3 percentage points below th… Id: claim_3028d234a3a33ab799342390 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 According to Taylor (1993), the actual federal funds rate deviated by as much as 3 percentage points below the prescribed Taylor rule rate during the 2002–2005 period. Labels: Inferred, Low #### Peak subprime mortgage origination occurred in 2005 with approximately 2 to 3 million mortgages, more than a… Id: claim_33bee981b13c471f1a6f0880 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Peak subprime mortgage origination occurred in 2005 with approximately 2 to 3 million mortgages, more than a year after the Fed began raising interest rates. Labels: Inferred, Low #### Cross-country data from the Eurozone between 2001Q3 and 2006Q4 shows a strong positive correlation between Ta… Id: claim_4c8482d9c89572092007190f Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Cross-country data from the Eurozone between 2001Q3 and 2006Q4 shows a strong positive correlation between Taylor-rule deviations and housing booms, particularly in Greece, Ireland, and Spain. Labels: Inferred, Low #### Washington Mutual Bank was a $300 billion thrift institution that became the largest bank failure in United S… Id: claim_5a26ef26b13db9470edbdce0 Parent: section_8bdfd445ddca520e2b1ba916 Depth: 2 Washington Mutual Bank was a $300 billion thrift institution that became the largest bank failure in United States history. Labels: Inferred, Low, known #### Taylor's counterfactual model simulated housing starts rather than house prices, concluding that adhering to… Id: claim_648f7d6c44ae4abb6e9abd5c Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Taylor's counterfactual model simulated housing starts rather than house prices, concluding that adhering to the Taylor rule from 2000 to 2006 would have prevented most of the 2002–2005 run-up in starts. Labels: Source-linked, Low #### The worst-performing subprime mortgage cohorts were originated in 2005 and 2006, when the federal funds targe… Id: claim_7100cef5a1a2228fa63ceed1 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 The worst-performing subprime mortgage cohorts were originated in 2005 and 2006, when the federal funds target rate had already risen to between 2.25% and 5.25%. Labels: Inferred, Low #### The Senate Permanent Subcommittee on Investigations (PSI) Levin-Coburn inquiry attributed the crisis to four… Id: claim_7130c90fc4b89cdf900e34c7 Parent: section_ab7347a044b93a34693dcd60 Depth: 2 The Senate Permanent Subcommittee on Investigations (PSI) Levin-Coburn inquiry attributed the crisis to four specific causes through case studies of Washington Mutual, Moody's, S&P, Goldman Sachs, Deutsche Bank, and OTS. Labels: Source-linked, Low, known #### Taylor estimated a statistically significant coefficient of 0.21 (s.e. Id: claim_8146529a2811c3c9e1ec6f05 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Taylor estimated a statistically significant coefficient of 0.21 (s.e. 0.056) linking the US federal funds rate to foreign policy-rule deviations, suggesting an international monetary policy contagion channel. Labels: Source-linked, Low #### Year-over-year house price growth began decelerating in mid-2004 (notably in July 2004 on the Case-Shiller 10… Id: claim_84ab1f7bce2ae631dee6a1aa Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Year-over-year house price growth began decelerating in mid-2004 (notably in July 2004 on the Case-Shiller 10-city index), coincident with the conclusion of the 1% funds rate period. Labels: Inferred, Low #### A counterfactual study on monetary policy and the housing bubble indicates that Taylor's proposed counterfact… Id: claim_8796fd8b7fc91c5e78982906 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 A counterfactual study on monetary policy and the housing bubble indicates that Taylor's proposed counterfactual monetary policy would not have averted the housing market collapse. Labels: Contested, Low #### On March 16, 2011, the FDIC filed a lawsuit against three former Washington Mutual executives (Kerry K. Id: claim_889b975c84e1e4c47e15d8a8 Parent: section_8bdfd445ddca520e2b1ba916 Depth: 2 On March 16, 2011, the FDIC filed a lawsuit against three former Washington Mutual executives (Kerry K. Killinger, Stephen J. Rotella, and David C. Schneider) alleging extreme and historically unprecedented risk-taking in home loans. Labels: Inferred, Medium, known #### On June 25, 2003, the FOMC lowered its federal funds target rate by 25 basis points to 1.0 percent, holding i… Id: claim_8ebd0e608a472298d4f3802d Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 On June 25, 2003, the FOMC lowered its federal funds target rate by 25 basis points to 1.0 percent, holding it there for one full year until late June 2004. Labels: Inferred, Low #### Between June 25, 2003, and June 29, 2006, the Federal Reserve raised the federal funds target rate 17 consecu… Id: claim_987407b8a492a5c099bba073 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Between June 25, 2003, and June 29, 2006, the Federal Reserve raised the federal funds target rate 17 consecutive times, increasing it from 1.0% to 5.25%. Labels: Source-linked, Low #### The FCIC identified over-the-counter (OTC) derivatives as one of its nine primary conclusions, stating they f… Id: claim_9eb459ce6b6d111426546353 Parent: section_6ad3cff1673956c51bbcb5cd Depth: 2 The FCIC identified over-the-counter (OTC) derivatives as one of its nine primary conclusions, stating they fueled mortgage securitization and expanded unchecked to trillions in notional value. Labels: Source-linked, Low, known #### The claim that the 2004 net capital rule change allowed investment banks to raise leverage from 12-15:1 to 30… Id: claim_a06a66ca268c077d2ec94e53 Parent: claim_735e0279863660f78ba7c1ed Depth: 2 The claim that the 2004 net capital rule change allowed investment banks to raise leverage from 12-15:1 to 30-40:1 is contested by the SEC, which argued the net capital rule applied to broker-dealers rather than holding companies. Labels: Contested, Low, known #### The Financial Crisis Inquiry Commission (FCIC) concluded that the 2008 financial crisis was avoidable and res… Id: claim_ac6246f56e928aa4df89d313 Parent: section_6ad3cff1673956c51bbcb5cd Depth: 2 The Financial Crisis Inquiry Commission (FCIC) concluded that the 2008 financial crisis was avoidable and resulted from human action and inaction rather than natural causes or computer modeling failures. Labels: Source-linked, Low, known #### Ben Bernanke argued that the Taylor rule deviation disappears when using forecast inflation and output gap da… Id: claim_bd8e8bed631f8198198ccae8 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Ben Bernanke argued that the Taylor rule deviation disappears when using forecast inflation and output gap data instead of contemporaneous values, making policy appear appropriately calibrated. Labels: Source-linked, Low #### The FOMC cut interest rates to 1 percent in June 2003 primarily as deflation insurance, noting concerns that… Id: claim_cff53409418b5407d64e6445 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 The FOMC cut interest rates to 1 percent in June 2003 primarily as deflation insurance, noting concerns that core PCE had fallen from 1.78% in January 2003 to 1.47% nine months later. Labels: Source-linked, Low #### The FCIC found that several financial industry figures appeared to have acted illegally and referred individu… Id: claim_d4077ecde61e45f60ae9d069 Parent: section_6ad3cff1673956c51bbcb5cd Depth: 2 The FCIC found that several financial industry figures appeared to have acted illegally and referred individuals for potential criminal prosecution. Labels: Source-linked, High, known #### Federal Reserve staff research (Dokko et al., 2009) found the 2003–2005 funds rate deviation was modest compa… Id: claim_efcf7da6d393b97add4848b5 Parent: claim_b4070827bcb56e05fc9e79d0 Depth: 2 Federal Reserve staff research (Dokko et al., 2009) found the 2003–2005 funds rate deviation was modest compared to pre-1987 standards and had a negligible impact on the rise in residential investment. Labels: Source-linked, Low #### The SEC's 2004 regulatory amendments were implemented to comply with the European Parliament's Financial Cong… Id: claim_fd5160e7fdb237bcf4c219bb Parent: claim_735e0279863660f78ba7c1ed Depth: 2 The SEC's 2004 regulatory amendments were implemented to comply with the European Parliament's Financial Conglomerates Directive (2002/87/EC), which mandated global consolidated supervision for firms operating in Europe. Labels: Source-linked, Low, known ##### The Levin-Coburn staff report released on April 13, 2011 was the only bipartisan congressional report on the… Id: claim_1d3d051f922ef59a97c74d1c Parent: claim_7130c90fc4b89cdf900e34c7 Depth: 3 The Levin-Coburn staff report released on April 13, 2011 was the only bipartisan congressional report on the financial crisis, as the FCIC divided along party lines. Labels: Source-linked, Low, known ##### The FCIC explicitly identified five primary causal mechanisms: widespread regulatory failures, breakdowns in… Id: claim_86cfa9f1c85a5a0c15f1baf7 Parent: claim_ac6246f56e928aa4df89d313 Depth: 3 The FCIC explicitly identified five primary causal mechanisms: widespread regulatory failures, breakdowns in corporate governance, excessive borrowing and risk-taking, ill-prepared policymakers, and systemic breaches in accountability and ethics. Labels: Source-linked, Low, known ##### The Office of Thrift Supervision (OTS) allowed Washington Mutual to issue hundreds of billions in high-risk O… Id: claim_adf3d496b57ad2d81883b664 Parent: claim_5a26ef26b13db9470edbdce0 Depth: 3 The Office of Thrift Supervision (OTS) allowed Washington Mutual to issue hundreds of billions in high-risk Option ARM mortgages knowing the bank used unsafe teaser rates and unrealistic borrower qualifications. Labels: Inferred, Medium, known ##### The Levin-Coburn Senate investigation identified widespread conflicts of interest as the central driver of th… Id: claim_cfb6e60d59009071e265ebc0 Parent: claim_7130c90fc4b89cdf900e34c7 Depth: 3 The Levin-Coburn Senate investigation identified widespread conflicts of interest as the central driver of the crisis, detailing how firms exploited clients and credit rating agencies assigned AAA ratings to high-risk assets. Labels: Source-linked, Low, known ##### AIG's collateral-call crisis began months before September 2008, with counterparties demanding billions by Ju… Id: claim_d08c652b18356b9bbf3ae1ff Parent: claim_16c4881ae260e37f22a5ef18 Depth: 3 AIG's collateral-call crisis began months before September 2008, with counterparties demanding billions by June, a large share of which was requested by Goldman Sachs. Labels: Inferred, Low, known ##### Prior to the 2004 CSE rule change, Bear Stearns had already reported a gross leverage ratio of 28.0 with $226… Id: claim_d1fbbd3da5986ca1e525f405 Parent: claim_a06a66ca268c077d2ec94e53 Depth: 3 Prior to the 2004 CSE rule change, Bear Stearns had already reported a gross leverage ratio of 28.0 with $226.7 billion in total assets as of February 29, 2004. Labels: Inferred, Low, known ###### The FCIC found that AIG senior management experienced severe governance breakdowns and did not understand the… Id: claim_1dbb218d0728edbcf4b7bf01 Parent: claim_86cfa9f1c85a5a0c15f1baf7 Depth: 4 The FCIC found that AIG senior management experienced severe governance breakdowns and did not understand the terms and risks of the company's derivatives exposure. Labels: Source-linked, Low, known ###### Bear Stearns operated under an internal financial statement guideline capping its net adjusted leverage ratio… Id: claim_6fe39ce8a3230e9f8e03cf71 Parent: claim_d1fbbd3da5986ca1e525f405 Depth: 4 Bear Stearns operated under an internal financial statement guideline capping its net adjusted leverage ratio at no more than 15.0 rather than an explicit regulatory cap. Labels: Inferred, Low, known ###### Republican Senator Tom Coburn concluded that unresolved and undisclosed conflicts of interest were at the hea… Id: claim_b1706a61f5e9ad908a949855 Parent: claim_cfb6e60d59009071e265ebc0 Depth: 4 Republican Senator Tom Coburn concluded that unresolved and undisclosed conflicts of interest were at the heart of the financial crisis rather than government housing policy. Labels: Inferred, Low, known ###### The FCIC rejected claims that regulators lacked authority, noting that the SEC could have limited risky pract… Id: claim_f21f92cd8994415f73131f86 Parent: claim_86cfa9f1c85a5a0c15f1baf7 Depth: 4 The FCIC rejected claims that regulators lacked authority, noting that the SEC could have limited risky practices and required more capital at major investment banks, and the New York Fed could have intervened in Citigroup's excesses. Labels: Source-linked, Low, known