Instead, in analogy to the Asian crisis, the primary cause of the breakdown was the poor performance of the financial system and financial regulation in the country receiving the capital inflows, not the inflows themselves.
In the case of the United States, sources of poor performance included misaligned incentives in mortgage origination, underwriting, and securitization; riskmanagement deficiencies among financial institutions; conflicts of interest at credit rating agencies; weaknesses in the capitalization and incentive structures of the governmentsponsored enterprises; gaps and weaknesses in the financial regulatory structure; and supervisory failures.