The Financial Crisis
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The Financial Crisis

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  • The Global Financial Crisis has been called by leading economists the worst financial crisis since the Great Depression of the 1930s.Unemployment in the United States rose to 25%, and in some countries rose as high as 33%.Cities all around the world were hit hard, especially those dependent on heavy industry.$1 trillion approximately 200 times the Jordanian budget for 2010 Source???? Rami
  • 1866 and 1890 Failure of a key London banks which was the world's financial centre. a Londonwholesale discount bank, known as "the bankers' bank", which collapsed in 1866 owing about 11 million pounds, equivalent to £981 million at 2008 prices (1 billion)The Great Depression: the largest and most important economic depression in the 20th century starting with the stock market crash of October 29, 1929 (known as Black Tuesday), but quickly spread to almost every country in the world.The oil crisis 1973: oil prices highly increased, causing the stock market to crash crashThe Crash of 1987: the largest one-day percentage decline in stock market history Companies were seeing their stock prices shoot up if they simply added an "e-" prefix to their name and/or a ".com" to the end, which one author called "prefix investing".
  • Reasons behind the crisis are not crystal clear, there are many opinions and views about it therefore the congress formulated a commisionis a ten-member commission appointed with goal of investigating the causes of the financial crisis of 2007–2009.Similar to a commission which was formed to investigated the causes of the Great Depression in the 1930s, And similar to the commission which investigation of 9/11 terrorist attacks but with higher power
  • Houses prices started to increase starting the year 2000, people took huge loans and mortgages to buy these homes with easy credit terms (low income, and financial stability) which means higher riskBorrowing more than could possibly pay back and took it as investment opportunity thinking that houses prices will continue to riseFinancial Innovations: mortgage-backed securities enabled the banks to sell those loans mortgages to financial instititution ( insurance industry and investment banks) which took it as investmentfinancial system did not keep up with those innovations and did not regulate their work properly housing prices declined. Which resulted in homes worth less than the mortgage loan So people stopped The Auto industry declined because people did not have money to buy
  • Point 1) 26 banks in 2008 and 140 banks in 2009Point 2) prices of homes their banks savings and unemploymentPoint 3) because banks doesn’t have liquidity to give as loans Point 4) trust declines and fails because investors are not sure they will get their money back (No Guarantee!!)
  • Point 1) Loans less available because banks don’t want to give to people whom will not pay, because many borrowers are not paying. Banks need money back.Point 2) banks and financial institutes give less interest on deposits and investments because they are in crisis. No enough money.Point 3) Government wants to save the money it have in this sensitive situation for emergencies. Therefore; cannot spend money on unnecessary projects.Point 4) Companies start firing because they are trying to save costs and money caused by losses from financial crisis.Economy http://www.globalissues.org/article/768/global-financial-crisis
  • Banks have recognized only a fraction of the overall potential losses – approximately $75 billion so far on subprime debt alone.Subprime: lending to people with poor credit ratings or limited credit historiesWhich does not include :mortgage loans, car loans, credit card balances, student loans etc…
  • Notice.. Unemployment rate increases. Financial crisis causes more people to be laid off, which leads to more damage to economy.
  • 1- Because the government took cautious procedures at early stages, and because the causes of the US financial crisis did not arise in Jordan.2- Jordan ( as an importer country ) had interventions by the central bank policies, to help stabilize the trades and economy.3- The Jordanian government guarantees all deposits in the Jordanian banks until the end of 2009.http://www.petra.gov.jo/Artical.aspx?Lng=1&Section=1&Artical=97602
  • As we can see the economic growth rate has slow down for the developing courtiers And for the advanced courtiersThe impact was much higher on the advanced countries
  • Details of the plan1 - allow the U.S. government to buy the assets of defunct worth seven hundred billion dollars related to mortgage.2 - The implementation of the plan in stages, giving the Treasury the possibility of buying the assets of defunct worth up to $ 250 billion in the first stage, with the possibility of raising this amount to $ 350 billion at the request of the Chairman, and members of Congress have a right of veto (veto) on procurement processes, which go beyond This amount is identified with the roof Besbamaip billion dollars.3 - State shares in the capital and profits of companies benefiting from this plan, which allows to make profits if market conditions improved.raise the ceiling on guarantees to depositors than one hundred thousand dollars to 250 thousand dollars for a period of one year.Grant tax exemptions worth about one hundred billion dollars for the middle class and businesses.Prevent the payment of compensation encourages the risks of no benefit, and set the financial rewards for executives who benefit from tax cuts, five hundred thousand dollars.9 - Restore the bonuses that have been presented on the potential profits have not yet been achieved.
  • Last reduction on interest rates was on Dec. 20th, 2009new temporary regulations these will help giving people more loans that will lead to foster economic growth Required reserves: each bank must keep certain amount of funds in the CBJ…by reducing the required reserve more liquidity is available for banksSource??? Rami
  • Globalization effect has increased the frequency and spread of financial crisesCentral banks’ must involve early in order to limit the spread and severeness Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis

The Financial Crisis The Financial Crisis Presentation Transcript

  • Financial Crisis 2007-2009
    Business Communication Presentation
    Prepared by:
    AyhamMass’adeh
    Rami Ismaeel
  • Introduction
    A Financial Crisis is a situation when money demand quickly rises relative to money supply.
  • Introduction
    Which is also known as: Credit crisis, Subprime Mortgage Crisis and Real Estate Crisis.
  • Why it is very significant?
    Worst financial crisis since the Great Depression of the 1930s
    Total cost of the crisis to US economy $600 billion
    The projected rescue plan will cost $1 trillion
  • Previous Financial Crises
  • Reasons behind The Financial Crises
    Formulation of “The Financial Crisis Inquiry Commission”
    A final report is due to the Congress on December 15, 2010
  • Reasons behind The Financial Crises
    Houses prices declined sharply 2006
    Easy credit conditions
    Financial Innovations
    Deregulation
  • Effects
  • Effects
  • Effects on the US Economy
  • Effects on the US Economy
  • Effects on the local Economy
  • Effects on the Global Economy
    There is global slow down in economic growth
    Reduced demand has led to price deflations in other sectors
    GrowthRate %
    Years
  • Response to Financial Crises
    U.S. government buys assets worth (700) billion dollars related to mortgage
    The US acquired shares in the companies benefiting from this plan
    Raise the ceiling on guarantees to depositors
    Grant tax exemptions worth about $100 billion
    Interfere of the compensation granted to heads of companies
  • Response to the Financial Crises Locally
    Several defensive measures had been taken by the Jordanian government to maintain monetary stability and to create an sustainable economic growth rates.
  • Jordan corrective & Preventive action taken
    Reduction of interest rate 3 times in 2009
    Issued new temporary regulations to ease credit requirements
    Lowered the Required Reserves for the local Banks
    Guarantee all deposits in the Jordanian banks until the end of 2010
  • Key lessons of the financial crisis
    Globalization Effect
    Central banks role
    Regulations
  • Brands in the Crises
  • Brands in the Crises
  • Q & A
  • References
    Auer, P. & Wehrmüller, S. (November, 21, 2008). Assessing the impact of the financial crisis on the US labour market. Retrieved (Dec, 23, 2009) from http://www.voxeu.org/index.php?q=node/2603. 
    BBC website. (2007). Financial crises: Lessons from history. Retrieved (Dec, 15, 2009) from http://news.bbc.co.uk/2/hi/ business/6958091.stm.
    Badaracco, R.(2009). Reasons For the Financial Crisis. Retrieved (Dec, 15, 2009) from http://ezinearticles.com/?Reasons-For-the-Financial-Crisis&id=1694865 .
    Central Bank of Jordan. (2009) various reports and announcements. Retrieved (December, 23, 2009). from http://cbj.gov.jo .
    Gerald, k. (2009). Three Ways to Know When the Credit Crisis Hits Bottom. The Money Map Report. Retrieved December, 18, 2009, Money morning .com.
    Laitman, M. (October, 17, 2008) The Financial Crisis – an Analysis. Retrieved (Dec, 15, 2009) from http://www.laitman.com/2008/10/the-financial-crisis-an-analysis 
    Moneycafe (December, 16, 2009) Prime Rate Retrieved (Dec, 23, 2009) from http://www.moneycafe.com/library/primerate.htm.
  • Thank you