The US Economic Crisis HiranJ 9 Oct 2008 Session content • • • • • The sub prime market and sub prime crisis Housing Mortgage Fraud CDS – Easy money! Wall Street in Turmoil The bailout plan The Sub Prime Market • What is the sub prime market? – Sub prime lenders • Lends to borrowers that do not qualify for mainstream lending by FannieMae/FreddieMac • Lending rates are usually high • Has prepayment penalties • One of the common lending terms is 2/28 ARM The Sub Prime Market • 2/28 ARM • ARM
Premium Subprime mortgage crisis
enacted legislation limiting the size of financial institutions‚ but instead we recovered and quickly forgot the past‚ only to have the same thing happen half a century later‚ worse than before‚ if we do not change our economic policies‚ this pattern of crisis and temporary recovery will
Premium Great Depression Wall Street Crash of 1929 Unemployment
Banking crisis To have a better understanding of 2008-2009 financial crisis we need to know where does it start and why it become global issue. The main reason for this financial meltdown of the economy was the Collateral debt obligation and rating agencies who rate them. CDO is acronym for Collateralized debt obligation. Longstaff and Arvind (2008) describe CDO as: “financial claim to the cash flows generated by a portfolio of debt securities or‚ equivalently‚ a basket of credit default swaps
Premium Subprime mortgage crisis Collateralized debt obligation Bank
for accounting. According to the suggestion mentioned by Hopwood(2009)‚ the implication of accounting can be applied to the financial economic crisis‚ both for practise and the research community. Therefore‚ in a specific situation of European sovereign debt crisis‚ the accounting also played a special role that may influence the process of the debt crisis happen. Since later 2009‚ some European countries are impossible for them to repay and refinance their government debt without the assistance
Premium Eurozone Monetary policy European Union
DERIVATIVE DISCLOSURES DURING THE FINANCIAL CRISIS CRITIQUE The case study resembles the important role of disclosures in using the derivatives. More companies are losing billions of dollars due to lack of transparency in doing derivative transaction. This can be seen in the monoline insurer like the American Municipal Bond Assurance Corporation (AMBAC) and the Municipal Bond Insurance Association were affected when the subprime mortgage financial crisis took place in 2007. The issue of disclosures
Premium Bond Risk Subprime mortgage crisis
The impact of the global financial crisis on the Philippine financial system – an assessment “The problem in politics is this: you don’t get any credit for disasters averted.” Henry M Paulson Jr‚ Former US Treasury Secretary I. Introduction The crisis that originated from the US subprime mortgage market escalated into a global phenomenon. Earlier debates on “decoupling”2 died down as the crisis’ contagion effects proved headstrong‚ cascading to the financial markets of advanced
Premium Bank Economics Philippines
1. Introduction The financial crisis in 2008 caused a global impact on the world`s economy. Starting with the real estate crash in the entire U.S. market‚ an increasing number of powerful banks suffered from the resulting credit defaults. The dependencies among the banks all over the world have spread the crisis to the financial markets overseas. Several governments have become increasingly important actors‚ with the aim to stabilize their domestic economy. Politicians agreed that the rescue of
Premium Subprime mortgage crisis Mortgage Financial crisis
Treasury securities has expanded significantly (Chari‚ Christiano‚ & Kehoe‚ 2008). The financial crisis is the result of the collapse of the housing bubble in the U.S.‚ which can be seen as the starting point of a crisis in the global economy afterward. The sudden financial crisis and the unexpected economic collapse in 2008 came as a shock to many because the speed and severity of the crisis were unpredicted (Bondt‚ 2010). Its consequences had strong influences on the financial system of many
Premium Subprime mortgage crisis
What is Financial Crisis? The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries‚ many financial crises were associated with banking panics‚ and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles‚ currency crises‚ and sovereign defaults
Premium Subprime mortgage crisis Bank Financial crisis
A Crisis So Severe‚ The World Financial System Is Affected Following a period of economic boom‚ a financial bubble—global in scope—has now burst. A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world. Furthermore‚ other weaknesses in the global financial system have surfaced. Some financial products and instruments have become so complex and twisted‚ that as things start to unravel‚ trust
Premium Subprime mortgage crisis Financial crisis