Credit Crisis

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When the economy fell apart, this slide show explained the basic economic principles at work and offered up some terms that were appearing in the paper at the time.

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Credit Crisis

  1. 1. Our Financial Crisis<br />
  2. 2. Credit<br />An arrangement for deferred payment of a loan or purchase<br />2. A reputation for sound character or quality; standing<br />
  3. 3.
  4. 4. mortgage<br />A temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.<br />
  5. 5. $100,000 loan from the bank….<br />at 5.0% annual interest….<br />= $3,333 (principal) + $5,000 (interest) = $8,333 a year<br />Over 30 years that adds up to…<br /> = $150,000 total interest<br />TOTAL PAYMENTS= $100,000 + $150,000 = $250,000<br />
  6. 6. credit check<br />$8,333a year mortgage payment.<br />1/4 of your take-home pay.<br />$100,000 mortgage = $33,300 take home pay.<br />Steady income!<br />
  7. 7. sub prime credit<br />$200,000 mortgage<br />$16,666 a year mortgage payment.<br />1/2 of your take-home pay.<br />$200,000 mortgage = $32,300 take home pay.<br />
  8. 8.
  9. 9.
  10. 10.
  11. 11. How Interest Works<br />You deposit money in bank.<br />Bank loans money to borrower (company, mortgage, car loan, etc.)<br />Borrower pays back loan, plus interest.<br />Bank pays you interest on deposit.<br />
  12. 12. Fear #1: Bank Loses Your Money<br />
  13. 13. FDIC<br />Federal Deposit Insurance Corporation<br />
  14. 14. Fear #2: Companies Unable to Get Loans<br />
  15. 15.
  16. 16. New Deal<br />
  17. 17. Current Plan<br />
  18. 18. Citizensvs. Wall Street<br />
  19. 19. Fear #3: Will Markets Learn Lesson?<br />Insanity: Doing the same thing over and over and expecting different results.<br />

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