Abstract: The subprime mortgage crisis in United States has had a serious impact on the world economy. This paper reviews the process of the emergence and development of the subprime mortgage crisis on the purpose of enhancing supervision and improving risk management, establishes a model containing monetary policies, asset price and accounting income, and analyses the relationship between the United States Fed interest rate and asset price, based on the data of Fed interest rate changes and the return rate of real estate in the U.S. from 2000 to 2009. It shows that the “return spread”, caused by the lower rate of return of holding monetary assets while the investment in real estate continued to rise, eventually leaded to the rise of leverage and the aggravation of the asset bubble. When monetary policyturned contractionary and “return spread” narrowed suddenly, triggering the burst of bubbles and exposing the entire economy to financial crisis. Therefore, “return spread” reflects the effects of monetary policy on asset price, leverage and asset bubbles, and it provides a new perspective for financial regulating.

Key words: monetary policies, asset price, return spread, the subprime mortgage crisis