Sub prime mortgage crisis

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I made this when I was in third year of my college.
This was my attempt to describe the subprime mortgage crisis that lead to the financial meltdown in 2008.

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Sub prime mortgage crisis

  1. 1. The Subprime Mortgage Crisis By :- Umang Rungta(060644) B.Tech 3 rd yr, Metallurgy, IIT Roorkee
  2. 2. Prior to the crisis :- Everyone was making money.
  3. 3. …… ..Specially the ones who lost the most during the crisis.
  4. 4. Here is how they used to earn……..
  5. 5. Real estate soared 15 – 30% per annum from 2002 - 2006
  6. 6. Investors earned a lot of money by investing in real estate…
  7. 7. They started taking bank housing loans to invest in real estate.
  8. 8. Banks considered housing loans to be the SAFEST……
  9. 9. …… .. As they could always sell the homes at higher prices in case of default.
  10. 10. But then somebody came up with an idea.
  11. 11. The investment banks like Lehmann brothers bought these home loans offering them a part of the interest.
  12. 12. They divided the loan into small parts called as CDO(Collateral Debt Obligations).
  13. 13. They sold these CDOs to various investors worldwide, keeping a part of the interest as profit.
  14. 14. The banks found it profitable as they could recover their loans instantly…….
  15. 15. … .So they competed with each other to provide more loans.
  16. 16. Investors used the easily available finance to earn money from the booming real estate market.
  17. 17. Their numbers increased…..
  18. 18. Their numbers increased…..
  19. 19. Their numbers increased…..
  20. 20. This caused the housing prices to rise further.
  21. 22. This helped sectors like infrastructure, steel, cement, etc…..
  22. 23. Purchasing Power Increased.
  23. 24. Easy credit was available to industries from the banks.
  24. 25. … ..Thus the economy was booming
  25. 26. But Then...
  26. 27. Banks started giving sub-prime or bad quality loans.
  27. 28. Eg. NINA (No Income No Asset loans)
  28. 29. The home owners couldn’t pay their installments……
  29. 30. … ..The loans defaulted.
  30. 31. Banks started selling the houses.
  31. 32. The number of houses for sale kept on increasing
  32. 33. The number of houses for sale kept on increasing
  33. 34. The number of houses for sale kept on increasing
  34. 35. As a result…….
  35. 36. The Housing Bubble Burst
  36. 37. The Housing Bubble Burst
  37. 38. Banks couldn’t recover their loans.
  38. 39. Estimated bank losses $500B +
  39. 40. Wall Street banks go under FAIL FAIL FAIL FAIL
  40. 41. As a result there was a shortage of credit. Resulting in……
  41. 42. In the 3 rd quarter of 2008 US GDP Decreased by 0.3%
  42. 43. The effects are now felt globally.
  43. 44. Even INDIA
  44. 45. SENSEX closed below 10,000 points.
  45. 46. Thousands lost their jobs.
  46. 47. The recession has also affected our institute.
  47. 48. Last year by December 90% of the students were placed.
  48. 49. This year 600 out of 1000 students are still unplaced.
  49. 50. Any Questions??????

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