Insigma HengTian Financial Crisis

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This presentation was given in 2009 at Insigma HengTian in Hangzhou, China as an overview of the causes of the Financial Crisis. The goals of this presentation were to clarity commonly used English vocabulary and explain differences between Chinese and American financial structures.

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  • Since 1997, the index has risen about 83 %
  • Since 1997, the index has risen about 83 %
  • Switch Slide 5 with six…..
  • Switch Slide 5 with six…..
  • Switch Slide 5 with six…..
  • An American has a mortgage for a home 100,000, after the bubble burst they could only sell their home for 50,000.
  • james
  • Insigma HengTian Financial Crisis

    1. 1. Factors that Contributed to the Global Financial Crisis WILLIAM R. HOLLAND FELLOW PROGRAM FOR BUSINESS STUDY IN ASIA May 12, 2009 Fudan University Mr. Hong Leiming Ms. Tang Lu Ms. Zhang Wenqian Mr. Zhang Jianxin Appalachian State University Ms. Anna Gaugert Ms. Mary Herron Mr. David Wilson Ms. Catherine Wood Mary “Beth” Herron 25.06.09
    2. 2. ABOUT ME… <ul><li>Appalachian State University –Boone, North Carolina </li></ul><ul><li>Master’s Degree </li></ul><ul><li>Industrial Organizational Psychology & Human Resource Management </li></ul><ul><li>(IO & HRM) </li></ul>
    3. 3. WHAT CAUSED THE FINANCIAL CRISIS? <ul><li>Three Interrelated Causes: </li></ul><ul><ul><li>Relaxed Mortgage Lending Standards </li></ul></ul><ul><ul><li>Housing Bubble </li></ul></ul><ul><ul><li>Hidden Financial Risk </li></ul></ul>
    4. 4. WHAT CAUSED THE FINANCIAL CRISIS? <ul><li>Three Interrelated Causes: </li></ul><ul><ul><li>Relaxed Mortgage Lending Standards </li></ul></ul><ul><ul><li>Housing Bubble </li></ul></ul><ul><ul><li>Hidden Financial Risk </li></ul></ul>
    5. 5. RELAXED MORTAGE LENDING STANDARDS <ul><li>New Financial Instruments: </li></ul>
    6. 6. RELAXED MORTAGE LENDING STANDARDS <ul><li>New Financial Instruments: </li></ul>Subprime Alt-A (Alternative A) <ul><li>Poor Credit History </li></ul><ul><li>Reduced documentation </li></ul><ul><li>High payment-to-income ratio </li></ul><ul><li>Low/No down payment </li></ul><ul><li>Strong Credit History </li></ul><ul><li>Reduced documentation </li></ul><ul><li>High payment-to-income ratio </li></ul><ul><li>Low/No down payment </li></ul><ul><li>Not owner occupied </li></ul><ul><li>Also called a liar loan </li></ul>
    7. 7. WHAT CAUSED THE FINANCIAL CRISIS? <ul><li>Three Interrelated Causes: </li></ul><ul><ul><li>Relaxed Mortgage Lending Standards </li></ul></ul><ul><ul><li>Housing Bubble </li></ul></ul><ul><ul><li>Hidden Financial Risk (mis-management) </li></ul></ul>
    8. 8. HOUSING BUBBLE
    9. 9. HOUSING BUBBLE 83% increase
    10. 10. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>
    11. 11. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>
    12. 12. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>Definition : Price the borrower pays to the bank for the use of the loan money
    13. 13. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>Definition : Price the borrower pays to the bank for the use of the loan money
    14. 14. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>Definition : Price the borrower pays to the bank for the use of the loan money
    15. 15. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>
    16. 16. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>Definition : Borrower receives a loan to purchase a home as an investment , with an intention to sell it in the future for profit
    17. 17. HOUSING BUBBLE <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>Definition : Borrower receives a loan to purchase a home as an investment , with an intention to sell it in the future for profit
    18. 18. <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>HOUSING BUBBLE
    19. 19. <ul><li>Housing Bubble was caused by three factors… </li></ul><ul><ul><li>Low interest rates </li></ul></ul><ul><ul><li>Speculation </li></ul></ul><ul><ul><li>Push for Home Ownership </li></ul></ul>HOUSING BUBBLE <ul><li>Increasing homeownership rates has been a goal of Democrat and Republican administrations as a way to: </li></ul><ul><li>Stabilize struggling neighborhoods; </li></ul><ul><li>Reduce crime; and </li></ul><ul><li>Address a fairness issue for minorities </li></ul>
    20. 20. HOUSING BUBBLE BURST
    21. 21. HOUSING BUBBLE BURST
    22. 22. WHAT CAUSED THE FINANCIAL CRISIS? <ul><li>Three Interrelated Causes: </li></ul><ul><ul><li>Relaxed Mortgage Lending Standards </li></ul></ul><ul><ul><li>Housing Bubble </li></ul></ul><ul><ul><li>Hidden Financial Risk </li></ul></ul>
    23. 23. <ul><li>Repackaging of Loans into Financial Instruments </li></ul><ul><ul><li>HIDDEN FINANCIAL RISK </li></ul></ul>
    24. 24. <ul><li>Repackaging of Loans into Financial Instruments </li></ul><ul><ul><li>HIDDEN FINANCIAL RISK </li></ul></ul>
    25. 25. <ul><li>Repackaging of Loans into Financial Instruments </li></ul><ul><ul><li>HIDDEN FINANCIAL RISK </li></ul></ul>
    26. 26. <ul><li>Repackaging of Loans into Financial Instruments </li></ul><ul><ul><li>HIDDEN FINANCIAL RISK </li></ul></ul>
    27. 27. <ul><li>Repackaging of Loans into Financial Instruments </li></ul><ul><ul><li>HIDDEN FINANCIAL RISK </li></ul></ul>
    28. 28. <ul><li>Repackaging of Loans into Financial Instruments </li></ul><ul><ul><li>HIDDEN FINANCIAL RISK </li></ul></ul>
    29. 29. <ul><li>Repackaging of Loans into Financial Instruments </li></ul><ul><ul><li>HIDDEN FINANCIAL RISK </li></ul></ul>
    30. 30. Banking Systems: Worldwide Financial Crisis CHINA USA
    31. 31. <ul><li>Questions? </li></ul>
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