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low for the first part of the decade. This low interest rate environment has spurred increases in mortgage financing and substantial increases in house prices.( Crouhy Michel G. et al, 2008) It is showed in figure 1. The investors borrowed money to invest in the real estate. We can see from figure 1 that private credit grew rapidly before 2007. The banks sold the loans to other banks as mortgage-backed securities, or subprime bonds. They committed to pay back the bonds with the cash flow from the investors. What’s more, the banks made use of leverage to multiply the benefit in this deal. But at the same time the default risk was largely increased. When the house price started to fall, which is showed in figure 2，the realty trading became difficult and the investors could pay the debt. As a result, the banks suffered from the mortgage-backed securities they had issued. The prices of Mortgage-backed securities (MBS), Collateralized Debt Obligation (CDO) and other financial derivatives plummeted. Banks and other financial institutions had to reduce the risk by "deleveraging", or sold the risky assets, or attracted new equity investment to rebuild capital. The main problem was liquidity emergency. Most banks raised standards for residential mortgage loans, consumer loans and business loans in the crisis ,which led to credit crunch ,and credit crunch resulted in economy recession.

But maybe we can have a different explanation for the crisis using the “Black Swan” theory. “Black Swan " refers to the unpredictable events rarely happens, but its huge impact may change everything. Taleb(2007) summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world. And the black swan theory also explains part of the credit crisis. Taylor &Williams (2008) found the phenomena of black swan in the monetary market. The break out of the crisis may totally ascribe to unexpected random events, and is not for any reason people try to find out. But for the policymakers , all they can do is how to reduce the losses caused by the crisis.

As laid out in the October 2008 Global Financial Stability Report (IMF, 2008b), policymakers around the world today face the imperative of stabilizing global financial markets, while nursing their economies through a global downturn and tight credit and ensuring that the recent rise in inflation is reversed. U.S. fiscal stimulus and public support for the housing and financial sectors have been justified to alleviate the current slowdown and to stabilize markets.(IMF, 2008a) Besides , the Fed's monetary policy has improved the economic environment. The Fed changed the banking system's reserve fund through the sale of treasury bills, thus affecting short-term interest rates and the credit situation. To deal with the phenomenon of credit crunch, the Fed created the Term Auction Facility (TAF). It is a credit instrument, which is used to allow financial institutions to attain short-term funds in an auction interest rate , and the period of funding is 28 days or 84 days. Thus the bank can get funded from the central bank and at the same time protect itself from negative reputation of capital shortage. The Fed also created the Term Securities Lending Facility(TSLF), which is to relieve the financing dilemma faced by the investors of MBS through the exchange of collate本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。