The Crucial Years

"Yes. Everyone will recognise many of these photographs. She looked out of her window in San Francisco one day and saw unemployed workers lined for food. She ends up working for the Farm Security Administration and her job was to take pictures. The Great Depression was not just an economic catastrophe but it coincided with a terrible drought. So, Dorothea Lange ends up taking pictures for the FSA of people travelling from Oklahoma to California to find work and escape the drought – Okies, they were called. This is what Steinbeck’s Grapes of Wrath is about. People were living in tents with children in the middle of nowhere. This is not the distant past – my grandparents told me about the Great Depression and going to the bank to collect savings which were all gone. This current panic was invisible to people, unless you actually traded in capital markets. Before, people would have been at the bank demanding their money but this time it was firms and institutional investors demanding money from the banks. So the banks sold their assets. The banking system has changed over the past 30 years. Nowadays, many firms use repurchase agreements (repo) like checking accounts. Repo involves the depositor taking collateral, which is often bonds that are securitised loans. The loans-selling process is called securitisation. Non-mortgage related securitisation itself was larger than the US corporate debt market before the crisis. So this is a very important market."