INTRODUCTION♦ On February 7, 2007 one of the world’s largestbanks, HSBC, announced losses related to U.S. subprime mortgage loans. A couple of months later, onApril 3, New Century Financial, a sub primespecialist,, Bear Stearns told an incredulous financialcommunity that two of its hedge funds suffered largelosses related to sub prime mortgages .
INTRODUCTION♦ Other Wall Street standard-bearers also startedreeling from bad investments, . Before the end ofAugust the crisis had spread to some French andGerman banks, and prompted the Federal Reserveand the European Central Bank to pump liquidity intothe banking system and to reconsider their interest-rate policies.
Cause of the crisiss Expanded U.S. financial institutions to granthousing loans largely on the one hand, andincreased the percentage of loans to the valueof the property (housing) on the other. Hasprovided financial institutions such loans to alarge number of consumers
Cause of the crisisCowners credit bad in the sense that theirwillingness and ability to repay loans is low andthus stumble upon solutions dates of repaymentof loans, which affects the development offinancial institutions that granted loans, and thennot being able to fulfill their obligations andcollapse.
Cause of the crisisCThere is a particular property is characterized byfinancial and banking institutions a large degree ofoverlap between them.On the other hand, there are other characteristicfeatures of the financial sector is that when thecollapse of the financial institution because of a badsituation affectsthis affect to another financial institutionsdepositorsWhich the financial position of the most good.
Cause of the crisiss And then resort to withdraw their depositsThus, the sudden withdrawal of deposits lead to thecollapse of the financial institutions even if it isplaced well and healthy. This is called the dominoeffect, so that if she broke down and one sheet ofpaper to the rest of the dominoes game cardscollapsed, so we find that the intervention of centralbanks in these cases is essential.
Cause of the crisiss Launched the start of the new crisis withthe announcement of a giant financialinstitution, is the Lehman Brothersbankruptcy for a symbolic beginning ofthe dangerous, because of this greatinstitution was one of the few companiesthat survived the massacre of the GreatDepression in1929.
Impact Of Crisis◊ For many developing countries, the U.S. creditcrisis will mean slower growth and risinginequality. The effects will be protracted. Andthe nature and degree of impact will vary widely.Some countries, notably those with extensiveforeign exchange reserves and strong fiscalpositions, will be much better able to cope thanothers. But overall the crisis is very bad news fordeveloping countries and especially for the poor.
Impact Of Crisis◊ Impacts felt through two channels. First, lowergrowth in the industrial countries will mean lessdemand for developing countries’ exports, bothmanufactured goods and most commodities (goldwill be a notable exception). A few developingcountries are growing based on domestic demandbut many are growing based on exports, and forthem sagging rich-world demand will be aproblem.
Impact Of Crisis◊ The second channel is reduction in capital inflowsto developing countries. Because the U.S. crisis hascreated a global credit crunch, investors arebecoming more risk averse and thus less willing toinvest in developing countries. As uncertainty andrisk have increased in international capital markets,investors will continue to shift the composition oftheir portfolios, away from riskier assets, such asemerging markets securities, and into traditionalstores of value, such as U.S. treasury bonds and gold.
Impact Of Crisis A crisis of liquidity in global financialmarkets.Reduced demand for raw materials andespecially the oil resulting in a lowerprice.Bankruptcy a large number of majorinternational companies in several areaslinked.
Impact On Arabian Area(Arab gulf states & Egypt ) are the mostArabian countries affected by the global crisis.Due to close contact with global economy. Decline in oil prices and the Arab Gulf States are still suffering from this inflation in the financial crisis . This led to a decline in exports to 300 billion . Many of the large projects that were interrupted by the financial crisis.
Impact On Arabian Area Generally the impact on arab countries differs fromone country to another, especially the non-oilcountries, and also closely associated with globalmarkets fell gradually affected by the financial crisisthan other countries.
Solution Of Crisis The U.S. governments rescue planpresented to the House of Representatives $700 billion and, after deliberations betweenrejection and acceptance was approved by theCouncil of Representatives and the Senate.•The emergence of incorporationcompanies (fusion) and sales of anumber of big companies to save itfrom bankruptcy.
Solution Of Crisis • Many of large central Banks provides large number of countries around the world with billions to ease the liquidity crisis , such as the U.S. Federal Bank and Japans central bank and the German Central Bank .The crisis continues, andcontinues ..................