The Global Financial Crisis of 2008-09 was a major stepstone in the financial world globally starting from the dot com bubble and ending with the real estate burst, it was a chain reaction.

1. Financia
l Crisis
of 2008

2. History of
the Event
• The Dot Com
Bubble
• Corporate Scandals
• September 11
Attack

3. Lowering the Interest Rates
the Federal
Reserve lowered
the federal funds
rate from 6.5% in
May 2000 to 1% in
June 2003
The aim was to
boost the economy
by making money
available to
businesses and
consumers at
bargain rates.

4. Affordable
Housing
Loans
• The result was an upward
spiral in home prices as
borrowers took advantage
of the low mortgage rates
• Even subprime borrowers,
those with poor or no
credit history, were able to
realize the dream of
buying a home

5. Collatoral
Debt
Obligation
Now Banks Sold
these Loans to
Investment Banks
which are further
converted to CDOs
and sold to retail
investors

6. Reducing
Net Capital
Requirement
by Securities
& Exchange
Commission
which
granted 30-
40X
Leverage
Goldman Sacks
Merrill Lynch
Lehman Brothers
Bear Stearns
Morgan Stanley

7. Credit
Default
Swaps
THE INSURANCE
ON THESE CDOS
WAS FURTHER
PROVIDED IN
THE FORM OF
CDS MAJORLY BY
AIG

8. Debt Trap
Subprime
Loans
Inflated
Housing
Prices
CDO
CDS

9. The
Trouble
• Eventually, interest
rates started to rise
and homeownership
reached a saturation
point.
• The Fed started
raising rates in June
2004, and two years
later the Federal
funds rate had
reached 5.25%

10. As 2007 got underway, one
subprime lender after another filed
for bankruptcy. During February
and March, more than 25 subprime
lenders went under. In April, New
Century Financial, which
specialized in sub-prime lending,
filed for bankruptcy and laid off half
of its workforce.

11. The Fall of Domino
• Northern Rock had to approach
the Bank of England for emergency
funding due to a liquidity problem.
• In October 2007, Swiss bank UBS
became the first major bank to
announce losses—$3.4 billion—from
sub-prime-related investments

12. March 2008 – The
Demise of Bear Stearns
In March, global investment bank
Bear Stearns, a pillar of Wall
Street that dated to 1923,
collapsed and was acquired by
JPMorgan Chase

13. September 2008 – The
fall of Lehman Brothers
The collapse of the venerable Wall
Street bank Lehman Brothers in
September marked the largest
bankruptcy in U.S. history, and for
many became a symbol of the
devastation caused by the global
financial crisis

14. Kareem Serageldin
was sentenced to 30
months in prison for
using his position at
Credit Suisse to hide
losses in mortgage-
backed securities

15. Who
Made
Money in
the Crisis
?

16. • Warren Buffet – Investments in
Goldman Sacks & General Electric
• Hedge fund manager John Paulson
made a lot of money betting against
the U.S. housing market
• Investor Carl Icahn proved his
market-timing talent by selling and
buying casino properties before,
during, and after the crisis.

17. Thank You