2008 Financial Crisis Group members: Sonali Lachhani Priyanka More Sumeet Kirve Dishant Nagrani Manoj Malvi
Initialization of crisis• Federal reserve chairman lowers interest rate to 1%.• Banks on Wall St. started taking loan form Federal at 1% other countries like China, Japan, Middle east also gave loans to banks on Wall St.• Banks started leverages.
When Lehman became Layman• Lehman Bothers became 4th largest investment bank in the US.• It became bankrupt as a large part of their loan portfolio comprised of loans for buying real estate.• Lehman Brothers was a big player in the mortgage-backed securities market.
Effects on India•$16 Billion outflow from India in 2008•Inflation at 12%•$291 Billion – Indian FX reserves as of 03 Oct.•Indian Oil Corp costs to rise 70% to $45 Billion•Industrial growth plummets to 1.3% in August•Sensex down ~50% in 2008•Sensex up ~50% from 2004
Effects on World Effects on USA•• Stock market tanked March 2008, acquisition of an investment• Many banks,STEARNS. lenders, real estate bank BEAR mortgage • investors and hedge funds suffered huge September 2008, Lehman brothers bankruptcy. losses•• Credit got tighter Closing of Washington Mutual.•• Effects on jobs Provision of loan to AIG by US Federal reserve. • Conversion of investment banks into commercial banks.
GLOBAL FINANCE CRISIS- "Red September" September 14, 2008: Merrill Lynch sold to Bank of America amidst fears of a liquidity crisis and Lehman Brothers collapse September 15, 2008: Lehman Brothers files for bankruptcy protection September 25, 2008: Washington Mutual was September 19, 2008: seized by the Federal Paulson financial rescue Deposit Insurance plan unveiled after a volatile Corporation, and its banking week in stock and debt assets were sold to JP markets. Morgan Chase for $1.9bn.Sep-08 Sep-08 Sep-08 Sep-08 Sep-08 Oct-08 September 17, 2008: September 29, 2008: September 7, 2008: The US Federal Reserve The House rejected bail-out Federal takeover of Fannie loans $85 billion to bill, DJIA down 7% Mae and Freddie Mac October 3,2008: The American International Group (AIG) to avoid House pass the bail out bill bankruptcy. September 16, 2008: Moodys and Standard and Poors downgrade ratings on AIGs credit on concerns over continuing losses to mortgage-backed securities, sending the company into fears of insolvency.