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Modeling the Financial Crisis

Join Dr. Mark D'Amato and Rod Motamedi as they examine the financial crisis through the lens of New York City, Ohio, and California. This presentation delves into the origins of the crisis, including housing market speculation, mortgage-backed securities, and the lack of regulation in the financial sector. Explore the cascading impacts on employment, income, and regional economies, with case studies illustrating job losses and gross regional product declines from 2009 to 2013 across key sectors in each region.

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Modeling the Financial Crisis

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  1. Modeling the Financial Crisis A few examples: New York City, Ohio, and California Presented by: Dr. Mark D’Amato and Rod Motamedi

  2. Where the Crisis Began • Speculation in housing market • Creation of the Mortgage Backed Security and the Credit Default Swap • Lack of government regulation in adjustable rate mortgages, and poor underwriting standards • Allowed MBS and CDS to continue unfettered

  3. Creation of Mortgage Backed Securities

  4. Spreading Contagion • Defaults in subprimes begin to increase, value of MBS decline • Financial companies take huge losses, begin to shore up new capital • Credit becomes scarce, lending slows, leveraged institutions unwind at a loss • Fear of counterparty risk from holdings of Credit Default Swaps and increased risk of default • Gov’t takes serious steps to prevent systemic failure as assets decline in value

  5. Regional Impact • Drop in employment • Decline in personal income • Decline in consumption expenditures • Decline in employment in industries that supply consumption goods

  6. Regional Impact Cont. • Decline in population • Due to loss of employment opportunities economic migrants seek employment outside the region • Decline of government spending

  7. Financial Sector Impact for NYC Scenario • Taking out growth from 2004-2007 in the financial sector for New York City • Monetary Authorities 3,349 Jobs • Sec, Comm Contracts 10,146 Jobs • Ins Carriers, rel act 2,255 Jobs Total 15,750 Jobs

  8. Total Impact for NYC Job Loss • 2009  43.40 thousand jobs lost • 2013  44.96 thousand jobs lost Gross Regional Product Loss • 2009  $9.311 billion • 2013  $10.55 billion

  9. 2009 Financial Sector Impacts - NYC

  10. Motor Vehicle Manufacturing Sector Impacts for Ohio Scenario • Taking out growth from 2004-2007 in the motor vehicle manufacturing sector of Ohio. • Over the four years there was a total of 3,013 jobs lost.

  11. Total Impact for Ohio Job Loss • 2009  10.36 thousand jobs lost • 2013  11.39 thousand jobs lost Gross Regional Product Loss • 2009  $934 million • 2013  $1.114 billion

  12. 2009 Motor Vehicle Manufacturing Impacts - Ohio

  13. Construction Sector Impacts in California Scenario • Taking out growth from 2004-2007 in construction sector for California • The total job loss in construction for 2004-2007 is 14,043 jobs.

  14. Total Impact for California Job Loss • 2009  30.36 thousand jobs lost • 2013  32.85 thousand jobs lost Gross Regional Product Loss • 2009  $2.015 billion • 2013  $2.425 billion

  15. 2009 Construction Sector Impacts - California

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