Editing Vicious circle (section)

===Subprime mortgage crisis===
[[Image:Subprime crisis - Foreclosures & Bank Instability.png|thumb|Vicious cycles in the subprime mortgage crisis]]

The contemporary [[Subprime mortgage crisis#Understanding the causes and risks of the subprime crisis|subprime mortgage crisis]] is a complex group of vicious circles, both in its genesis and in its manifold outcomes, most notably the [[late 2000s recession]]. A specific example is the circle related to housing. As housing prices decline, more homeowners go "[[negative equity|underwater]]", when the market value of a home drops below that of the mortgage on it. This provides an incentive to walk away from the home, increasing defaults and foreclosures. This, in turn, lowers housing values further from over-supply, reinforcing the cycle.<ref>{{cite web |last=Feldstein |first=Martin |date=18 November 2008 |title=How to Help People Whose Home Values Are Underwater |url=https://www.wsj.com/articles/SB122697004441035727 |department=Opinion |work=[[The Wall Street Journal]] |access-date=2013-09-05}}</ref>

The foreclosures reduce the cash flowing into banks and the value of mortgage-backed securities (MBS) widely held by banks. Banks incur losses and require additional funds, also called "recapitalization". If banks are not capitalized sufficiently to lend, economic activity slows and [[unemployment]] increases, which further increase the number of foreclosures. Economist [[Nouriel Roubini]] discussed vicious circles in the housing and financial markets in interviews with [[Charlie Rose]] in September and October 2008.<ref>{{cite web|url=http://www.charlierose.com/view/interview/9248 |title=Roubini & Panel |publisher=Charlie Rose |access-date=2013-09-05}}</ref><ref>{{cite web |url=http://www.charlierose.com/view/interview/9310 |title=Rose & Roubini Discussion |publisher=Charlierose.com |access-date=2013-09-05 |url-status=dead |archive-url=https://web.archive.org/web/20130401130731/http://www.charlierose.com/view/interview/9310 |archive-date=2013-04-01 }}</ref><ref>{{cite web|url=http://www.charlierose.com/view/clip/9416 |title=Rose & Roubini |publisher=Charlierose.com |access-date=2013-09-05}}</ref>