72987
Global Financial Crisis- Cause,
Response, Future?
- Cause
- Lenders
- Giving 100% percent mortgages (av. 99.3%)
- NINJA No Doc loans
- Giving 100% percent mortgages (av. 99.3%)
- Individuals
- Demand for housing
- Seen as a good investment
- Demand for housing
- US Federal Reserve
- Rates @ 1%
- Regulations relax on Leverage
- Rates @ 1%
- Investment Banks
- GS knowingly sold toxic CDOs and bought CDS against them
- GS knowingly sold toxic CDOs and bought CDS against them
- Rating Agencies
- AAA ratings to CDO and RMBS
- AAA ratings to CDO and RMBS
- Investors
- Demand for CDO
- Belief that CDOs were less risky
- Raghuram Rajan 2005 - Has Financial
Development Made the World Riskier?
- Raghuram Rajan 2005 - Has Financial
Development Made the World Riskier?
- Belief that CDOs were less risky
- Demand for CDO
- Mortgage brokers
- Pressure from banks to meet demand
- mis-sold mortgages to fixed income
- Pressure from banks to meet demand
- AIG
- Credit Default Swaps
- Bonuses for selling - short term cash on long term risk.
- Credit Default Swaps
- Europe - central
banks covering up
- Soverign Debt
- Soverign Debt
- Lenders
- Response
- Deleverage
- Bailouts
- AIG
- AIG
- Insolvent
- Lehman
- Lehman
- LTRO
- TARP
- US Fed pays $167 billion in bailouts
- US Fed pays $167 billion in bailouts
- Consumer Confidence drops
- China manufacturing hit
- 10 million migrant workers unemployed
- 10 million migrant workers unemployed
- EU Unemployment hits10%
- More people on dole in Spain than living in Denmark
- More people on dole in Spain than living in Denmark
- China manufacturing hit
- Deleverage
- Future
- market has fewer, larger banks
- Ireland - tracker mortgages means
banks tied into losses for long term
- Following 1929, congressional acts, repealed
- More Bubbles
- China 65 million vacant properties
- China 65 million vacant properties
- Peak Oil
- Increased Population, food shortages
- Peter Schiff says power will be in Production \ Food
- market has fewer, larger banks
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