ABSTRACT
The Credit Crunch has displayed some dramatic phenomena. Banks have
failed; markets have plunged; people have lost their homes. We begin by look-
ing at what happened – and hence what we have to explain. Property is the
obvious place to start, as falling house prices were one of the early symptoms
of the Crunch and one of the major causes of losses. So we begin there. Then
we look at the nature of the financial institutions involved in mortgage lend-
ing and how that has changed over the years. The actions of these firms trans-
mitted the mortgage problem into a wider financial markets problem. Some
parts of this market reaction are described, and we trace the linkages between
mortgage borrowers, lenders, the financial markets and the wider economy1.
