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.