2. Agenda
ο΅ What Happened
ο΅ Before September 2008
ο΅ Freddie Mac & Fannie Mae
ο΅ Collapse of Lehman Brothers
ο΅ AIG Fear & TARP
ο΅ Spreading Global
ο΅ How it Happened
ο΅ Sub-prime Mortgage Lending
ο΅ CDOs & Derivatives
ο΅ Housing Bubble bust
ο΅ Aftermath
ο΅ Blue Monday Crash & Further advancement in Europe
ο΅ Financial Crisis Inquiry Commission
ο΅ Occupy Wall Street
3. What Happened
ο΅ Before September 2008
ο΅ In 2005, Raghuram Rajan presented his paper "Has Financial
Development Made the World Riskier?"
ο΅ In 2006, Nouriel Roubini warned IMF about housing bubble bust and
possible recession
ο΅ In 2006, Satyajit Das published his book βTraders, Guns & Moneyβ
describing the risks of derivatives
ο΅ In 2007, key Mortgage Lending companies collapse
ο΅ In 2008 Jan, Financial Markets downturn started
ο΅ In 2008 Mar, Bear Stearns acquired by JPMorgan for $2 for share
4. What Happened
ο΅ Freddie Mac & Fannie Mae
ο΅ Government sponsored Enterprises (GSE)
ο΅ Exempted from regulation
ο΅ Issue mortgage-backed securities (MBSβs) just like investment banks
ο΅ By Sept 2008, they are in debt of MBSβs worth $ 5 trillion
ο΅ Sept. 2008, Treasury intervention, placed the two under government
supervision
5. What Happened
ο΅ Collapse of Lehman Brothers
ο΅ Longest-running Wall Street CEO Dick Fuld
ο΅ Hank Paulson and government meet up with other bankers in Wall
Street
ο΅ Moral Hazard
ο΅ Chapter 11 Bankruptcy
ο΅ Shockwave of events after the Leahman bankruptcy
6. What Happened
ο΅ AIG Fear & TARP
ο΅ AIG in the brink
ο΅ Understanding Credit Default Swaps
ο΅ USD 85 Billion lending by Federal Reserve
ο΅ Inevitable collapse of whole financial system
ο΅ Hank Paulson and Congress meeting for USD 700 billion bailout
proposal as TARP
ο΅ Defeat of Emergency Economic Stabilization Act β Bailout Bill
ο΅ Passing of Bailout Bill in October 2008
ο΅ Capital injection of the large financial institutions
7. What Happened
ο΅ Spreading Global
ο΅ G7 Summit in October 2008
ο΅ Iceland Bankruptcy
ο΅ Europe shockwave and the glimpses of riots
8. How it Happened
ο΅ Sub-prime Mortgage Lending
ο΅ Prime mortgage lending
ο΅ Housing Bubble
ο΅ Investors and greed of Wall Street lead to sub-prime mortgage lending
ο΅ Underwritting & Bonus scheme
9. How it Happened
ο΅ CDOs & Derivatives
ο΅ Traditional derivatives in commodities market
ο΅ Ideas for minimizing credit risks for banks
ο΅ First credit default swap and Blythe Masters
ο΅ Synthetic Collateral Debt Obligations (CDOs)
ο΅ Rating companies and risk levels
ο΅ De-regulation of derivatives
ο΅ New age in financial markets!
10. How it Happened
ο΅ Housing Bubble bust
ο΅ Unexpected happened!
ο΅ Foreclosures spreading throughout US
ο΅ CDOs going bad and insurance companies cannot keep their obligations
ο΅ Mortgage companies going under followed by Investment banks and
insurance companies
ο΅ Investors losing the investments and stock market plummet
11. Aftermath
ο΅ Blue Monday Crash & Further Advancement in Europe
ο΅ RBS losses and British reaction
ο΅ Denmark, France and Germany response
ο΅ World Bank projection of world production loss
12. Aftermath
ο΅ Financial Crisis Inquiry Commission (FCIC)
ο΅ 19 public hearings with major bankers and other parties
ο΅ Report and Conclusions
ο΅ Was avoidable!
ο΅ De-regulation
ο΅ Governance and risk management
ο΅ Lack of transparency
ο΅ Governmentβs ill-preparedness
ο΅ Systematic breakdown of ethics and practices
13. Aftermath
ο΅ Occupy Wall Street
ο΅ Protest movement
ο΅ Enter the Anonymous hacktivist group
ο΅ βWe are 99%β
ο΅ Income inequality
ο΅ Noam Chomsky spoke out and Michael Moore addressed the crowd
ο΅ Further marches and protests throughout 2011 and 2012