Serena Williams (P SLIDE)
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Serena Williams (P SLIDE)

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Serena Williams (P SLIDE) Presentation Transcript

  • 1. CURRENT ISSUE THE SUBPRIME MORTGAGE CRISIS AND ITS EFFECT TOWARDS CARIBBEAN Serena Williams Kennedy Andreas Ceorizan Ponis Chin Jo Jo Marcella Lapios Lim Su Loung Pressca Eva Gasinau1
  • 2. INTRODUCTION  Sub-prime mortgages are generally for borrowers with a low credit score which include mortgages with very low or no down payments  study underlines several effects toward Caribbean Island likely trades activities, tourism sectors, Caribbean financial institution and also foreign direct investment (FDI).2
  • 3. OBJECTIVE OF STUDY The main objective of study is;  To identify the causes of subprime mortgage crisis  To determine the effects of subprime mortgage crisis towards Caribbean3
  • 4. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Housing bubble (Boom and bust in the housing market) -the housing bubbles are happen cause of the US house prices rose dramatically from 1998 until late 2005 (John Marshall, 2009)  Homeowner speculation -approximately one million borrowers took subprime mortgages to finance the purchase of their first home. -Many homebuyers with subprime loans were4 defaulted
  • 5. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  High-risk mortgage loans and lending/borrowing practices -Banks offered easy access to money before the mortgage crisis emerged -Borrowers got into high risk mortgages  Securitization practices -Ben Bernanke stated that securitization markets remained effectively shut. -The relationship between securitization and the subprime crisis relates to a fundamental fault.5
  • 6. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Policy  Government policies -( bubble of real estate loans)as an effect of too much liquidity placed on the market by strongly expansive monetary policy of the Fed of Greenspan.  Policies of Central banks -Central bank less concerned with avoiding asset price bubbles, such as the housing bubble and dot- com bubble.6
  • 7. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Inaccurate credit ratings -The myth that subprime loans went only to those with bad credit arises from overlooking the complexity of the subprime mortgage market  Oversupply of US Dollars  distort real economy -led to the increased of commodity prices, inflation and reduced the purchasing power parity of US dollar.  making financial institutions lowering lending criteria -contributed to the subprime mortgage crisis because people could not repay their loans.7
  • 8. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Deregulation opens door for subprime lending -led to new mortgage instruments and cause many borrowers failed to understand and could not afford.  Reckless lending of financial institutions -allows the unsuitable borrowers to get credit8
  • 9. CAUSES OF THE SUBPRIME MORTGAGE CRISIS  Globalization (new technology) and the trade deficit -the use of new technology the exploitation of cheap labor on a world scale intensified, sped-up in real time, and reached further distances. -deficit was resulting from U.S. investment exceeding its savings, or imports exceeding exports.  Credit default swaps (CDS) -payments under a CDS would only be triggered by the companys failure to pay interest or principal on its debts due to bankruptcy or some other severe9 liquidity issue.
  • 10. THE EFFECT TOWARDS CARIBBEAN  Financial Sector  Economic growth  Flow of Remittances  Foreign Exchange Reserves  Tourism  Cost of Borrowing  Foreign Direct Investment (FDI)  Other Export Earnings10
  • 11. CONCLUSION  This subprime crisis which originated in the United States effects slowdown the whole economic in the world includes developing countries such as Caribbean.  So the role of government as the intervention is necessary and appropriate to became as intermediaries in Caribbean.11
  • 12. THANK YOU Q&A12