Did Bank Capital Regulation Exacerbate the Subprime Mortgage Crisis?

Table 4

Differences in economic conditions before and during the SMC.

Before SMC (Year < 2007)	During SMC (Year ≥ 2007)
High level of macroeconomic activity	Lower level of macroeconomic activity
Boom conditions	Recessionary conditions
Low perceived credit risk	Higher perceived credit risk
High credit ratings	Lower credit ratings
Low delinquency rate	Higher delinquency rate
Low foreclosure rate	Higher foreclosure rate
Regret-averse lenders	Risk-averse lenders
House prices increase	House prices decline
Low counterparty risk	Higher counterparty risk
High rate of securitization of Subprime mortgage loans	Lower rate of securitization of Subprime mortgage loans
Low investment in safe assets such as treasury securities	Higher investment in safe assets such as treasury securities
High spreads	Lower spreads
No credit crunches	Credit crunches
Highly leveraged financial institutions	Less highly leveraged financial institutions