Analyzing the Liquidity Deterioration Mechanism and the Financial Supervision Mechanism Defect of Sub-Prime Crisis

The capital market crunch was the main approach through which the Sub-prime mortgage crisis caused the liquidity deterioration inside the financial system.Before the crisis,the risky lever operating mechanism of the investment banks provided huge energy for the capital market crunch.After the crisis,the de-leverage malfunction of the investment banks detonated the crunch crisis.At the same time,commercial banks' concealing off balance sheet entity investment style brought capital market's liquidity deterioration into the credit market,which aggravated the liquidity contraction inside the financial system.The essay holds that the slowness of the financial supervision's development pace should take the most blame.The sub-prime crisis revealed the risk of the lag of financial regulatory system.China should learn from it,improve itself,and finally build an enduringly healthful financial market.