Federal Reserve Bank of Chicago
At this writing in early October, 2008 it appears that the first phase of the financial crisis is ending and the second is about to or has begun. The phase that is ending entails flushing the worst assets created during the sub-prime lending boom out of the financial system. It has been accomplished by massive write downs and government actions of various kinds culminating with the creation of a taxpayer financed buyout fund for these assets. The phase that is beginning will be driven by the broader deterioration in bank balance sheets and income streams emanating from the ongoing decline in real estate values.
