Developments 10 years ago The U.S. and global financial system was in a dangerous place 10 years ago.
U.S. house prices had peaked in 2006, and strains in the subprime mortgage market grew acute over the first half of 2007.2 By August, liquidity in money markets had deteriorated enough to require the Federal Reserve to take steps to support it.3 And yet the discussion here at Jackson Hole in August 2007, with a few notable exceptions, was fairly optimistic about the possible economic fallout from the stresses apparent in the financial system.4 As we now know, the deterioration of liquidity and solvency within the financial sector continued over the next 13 months.