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Executive summary

There are a number of reasons why banks may suddenly increase the costs of borrowing or make borrowing more difficult. In the next report, it should be shown that the main causes of the global credit crunch are sub prime mortgage crises in the US. Analyze the reasons that led to the sub prime mortgage crises and how they precipitated the global credit crunch. In a word, there are three reasons which lead to sub prime mortgage crises. Follow by the report, it should examine and explain the effects these crises, and compare two economies the US and Australia, use data – share prices, interest rates, inflation, unemployment, GDP figures, consumer and business confidence indices, graphs and other like material to support your discussion. Finally, to compare the weekly data on ANZ, CBA, NAB and WBC share prices with the AOI.

Table of contents

1. Part A…………………………………………………………………P4-6

2. Part B…………………………………………………………………P7-13

3. Part C…………………………………………………………………P14-15

4. Reference list…………………………………………………………P16

Task

Part A
What have been the main causes of the global credit crunch which commenced in the US banking industry?

The main causes of the global credit crunch are sub prime mortgage crises in the US. In the US sub prime mortgage market which ‘turned sour by borrowers with poor credit struggling to meet payments as interest rates rise — is fast becoming a global worry. With huge chunks of this debt packaged up and sold to financial companies across the world, bad loans are roughing up banks and markets just about everywhere’(Smith, 2007). Therefore, Sub prime mortgage market was meltdown in USA, it also impact global economics. The sub prime mortgage crisis hits bank sector in the financial market. John Rubino indicates that suffering lost from sub prime mortgage depend on the business model of banks