The Causes of the 1929 Stock Market Crash: A Speculative by Harold Bierman Jr.

Money Monetary Policy

By Harold Bierman Jr.

Trying to show the genuine motives of the 1929 industry crash, Bierman refutes the preferred trust that wild hypothesis had excessively pushed up inventory industry costs and led to the crash. even though he recognizes a few costs of shares akin to utilities and banks have been overpriced, average causes exist for the extent and bring up of all different securities costs. certainly, if shares have been overpriced in 1929, then they're much more overpriced within the present period of miraculous development in inventory costs and funding in securities. The explanations of the 1929 crash, Bierman argues, lie in an unfavourable selection through the Massachusetts division of Public Utilities coupled with the preferred perform often called debt leverage within the Twenties company and funding enviornment.

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Although these data do contain several of the variables in A and P, such as applicant income and property location, they do not include several other variables that are likely to affect loan returns and to be correlated with minority status. These missing variables include applicant wealth and credit history, the payment-to-income ratio, and the loan-to-value ratio. Moreover, one-third of mortgages immediately sold to the secondary market do not indicate the race of the applicant, and almost half of such mortgages do not indicate applicant income or urban area (Canner and Gabriel, 1992).

Department of Housing and Urban Development, 2000), 39 percent of households in upper-income black neighborhoods have subprime refinancing loans, compared to only 18 percent of households in low-income white neighborhoods and only 6 percent in high-income white neighborhoods. Finally, a recent analysis by Pennington-Cross, Yezer, and Nichols (2000) finds that black and Hispanic borrowers are significantly more likely than white borrowers to obtain a subprime mortgage, even after controlling for a wide range of financial variables, including credit history.

A disturbing feature of the growth in subprime lending is that it appears to be associated with growth in predatory lending, loosely defined as lending that relies on consumer ignorance, misleading 20 Chapter 2 sales techniques, and, in some cases, outright fraud, to issue mortgages with interest costs above the full-information, competitive level. Of course, not all subprime lending is predatory lending; indeed, in many if not most cases, the existence of relatively highcost loans makes homeownership possible for people who could not otherwise obtain credit.

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