Boom and Bust: a Study Employing Principal Agency to Investigate the Behavior of Borrowers, Lenders, and Investors That Led to the Mortgage Crisis in 2007

Authors

Gregory D. Benckart, The College of Wooster

Abstract

In the biggest economic downturn since the Great Depression, the financial collapse of 2007 was a result of many economic factors. In particular, risky mortgage lending has been widely deemed the root cause of the financial crisis. In this research, borrower-lender and investor lender relationships are investigated using the Principal Agent Theory. It is hypothesized that a drastic increase in loan originations combined with deteriorating lending standards caused the eventual failure across the financial industry. Upon statistical analysis, this study provides evidence supporting the hypothesis based on data measured across one hundred metropolitan areas in 2010.

Advisor

Burnell, Barbara

Department

Economics

Recommended Citation

Benckart, Gregory D., "Boom and Bust: a Study Employing Principal Agency to Investigate the Behavior of Borrowers, Lenders, and Investors That Led to the Mortgage Crisis in 2007" (2012). Senior Independent Study Theses. Paper 764.
https://openworks.wooster.edu/independentstudy/764

Disciplines

Economics

Publication Date

2012

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis