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The Subprime Collapse
 

The Subprime Collapse

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Just a short piece on the credit crisis.

Just a short piece on the credit crisis.

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    The Subprime Collapse The Subprime Collapse Presentation Transcript

    • The Subprime Collapse
    • Subprime Lending means giving loans to people who are high risk.
    • including No Income, No Job and No Assets
    • Or… Ninja Loans
    • Banks sold loans and credit risks to investors called Securitization .
    • Why?
    • “…increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people.” New York Times, September 30, 1999
    • Greed
    • The Financial Perfect Storm
    • Dramatically cut interest rates
    • encouraged more borrowing.
    • increasing home ownership,
    • consumer spending & house prices
    • House prices increased at a much higher rate to median household income
    • House prices became unaffordable
    • In 2005
    • 43% …of 1st time buyers made no down payments at all.
    • People with poor credit found it…
    • difficult to pay their mortgage.
    • Properties with foreclosure activities.
    • The two giants in securitization…
    • collapsed.
    • Wall Street was Greedy .
    • Short term profit was more important than the good of the people.
    • Chief Executive Lehman Brothers Richard S. Fuld, Jr. Earned $34.4 million in 2007.
    • declared bankruptcy.
    • Congress did not act in time.
    • We all pay the price.