Business Standard

Assessing contagion: 'Little, then lottle', like ketchup coming out of bottle

In every systemic crisis, there are initial soothing noises from regulators and commentators: There won't be contagion. Except that eventually there is contagion more often than not, writes T N Ninan


T N Ninan
Financial crises follow faithfully Ogden Nash’s description of ketchup coming out of a bottle: “First a little, then a lottle.” Consider the financial collapse of 2008. The action actually began two years earlier, when house prices in the US began to fall. In early 2007, some of those who had lent for sub-prime housing began to file for bankruptcy. In June that year, two big hedge funds failed on account of their exposure to the sub-prime market. These were the early tremors. Then came the earthquake.

In January 2008, Countrywide (the biggest issuer of sub-prime securities) avoided bankruptcy only by being
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

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First Published: Mar 17 2023 | 8:18 PM IST

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