A financial crisis is defined as any situation where one or more significant financial assets – such as stocks, real estate, or oil – suddenly (and usually unexpectedly) loses a substantial amount of their nominal value. Common examples of a financial crisis include financial market crashes, housing market crashes and bank runs. A financial crisis may have multiple causes. Generally, a crisis can occur if institutions or assets are overvalued, and can be exacerbated by irrational or herd-like investor behavior. For example, a rapid string of selloffs can result in lower asset prices, prompting individuals to dump assets or make huge savings withdrawals when a bank failure is rumored. Contributing factors to a financial crisis include systemic failures, unanticipated or uncontrollable human behavior, incentives to take too much risk, regulatory absence or failures, or contagions that amount to a virus-like spread of problems from one institution or country to the next. This financial crisis was the worst economic disaster since the Stock Market Crash of 1929. It started with a subprime mortgage lending crisis in 2007 and expanded into a global banking crisis with the failure of investment bank Lehman Brothers in September 2008. Huge bailouts and other measures meant to limit the spread of the damage failed and the global economy fell into recession. As it was the most damaging financial crisis event, the Global Financial Crisis, deserves special attention, as its causes, effects, response, and lessons are most applicable to the current financial system. The 2007–2008 financial crisis, or Global Economic Crisis (GEC), was the most severe worldwide economic crisis since the Great Depression. Predatory lending in the form of subprime mortgages targeting low-income homebuyers,[1] excessive risk-taking by global financial institutions,[2] a continuous buildup of toxic assets within banks, and the bursting of the United States housing bubble culminated in a "perfect storm", which led to the Great Recession. Mortgage-backed securities (MBS) tied to American real estate, as well as a vast web of derivatives linked to those MBS, collapsed in value. Financial institutions worldwide suffered severe damage,[3] reaching a climax with the bankruptcy of Lehman Brothers on September 15, 2008, and a subsequent international banking crisis.[4] The preconditioning for the financial crisis was complex and multi-causal.[5][6][7] Almost two decades prior, the U.S. Congress had passed legislation encouraging financing for affordable housing.[8] However, in 1999, parts of the Glass-Steagall legislation, which had been adopted in 1933, were repealed, permitting financial institutions to commingle their commercial (risk-averse) and proprietary trading (risk-taking) operations.

1. FINANCIAL CRISIS 2008
(THE GREAT RECESSION)
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
(GROUP PRESENTATION)

2. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
INTRODUCTION
BEFORE MOVING AHEAD LET’S DISCUSS THE TERM
“FINANCIAL CRISIS”
PRESENTATION PREPARED BY : KSHITIJ JAISWAL

3. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
SO, WHAT IS FINANCIAL CRISIS ?
 A financial crisis is defined as any situation
where one or more significant financial assets
– such as stocks, real estate, or oil – suddenly
(and usually unexpectedly) loses a substantial
amount of their nominal value.
Common examples of a financial crisis
include financial market crashes, housing
market crashes and bank runs.

4. BUT NOW ONE QUESTION RISES
What Causes a Financial Crisis?
PRESENTATION PREPARED BY : KSHITIJ JAISWAL

5. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
 A financial crisis may have multiple causes. Generally, a crisis can
occur if institutions or assets are overvalued, and can be
exacerbated by irrational or herd-like investor behavior. For
example, a rapid string of selloffs can result in lower asset prices,
prompting individuals to dump assets or make huge savings
withdrawals when a bank failure is rumored.
 Contributing factors to a financial crisis include systemic failures,
unanticipated or uncontrollable human behavior, incentives to take
too much risk, regulatory absence or failures, or contagions that
amount to a virus-like spread of problems from one institution or
country to the next.
Causes of Financial Crisis

6. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
NOW LET’S DISCUSS ONE FAMOUS
CASE STUDY ON GLOBAL FINANCIAL CRISIS
SO THAT WE CAN UNDERSTAND
THE CONCEPT VERY DEEPLY
PRESENTATION PREPARED BY : KSHITIJ JAISWAL

7. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
KEY TERMS :
 SUBPRIME LENDING – It means making loans to people who may have difficulty
maintaining the repayment schedule. Borrowers who do not qualify for market interest
rates.
 CREDIT DEFAULT SWAPS(CDS) - Credit default swaps (CDS) are a type of insurance against
default risk by a particular company.
 COLLATERALIZED DEBT OBLIGATION(CDO) - A collateralized debt obligation (CDO) is a
structured financial product that pools together cash flow-generating assets and
repackages this asset pool into discrete tranches that can be sold to investors.

8. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
 QUANTITATIVE EASING - its an unconventional monetary policy in which a Central Bank
purchases government securities or other securities from the market in order to lower
interest rates and increase the money supply.
 BAILOUT - A bailout is a situation in which a business, an individual or a government
offers money to a failing business to prevent the consequences that arise from the
business's downfall. Bailouts can take the form of loans, bonds, stocks or cash.

9. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
 This financial crisis was the worst economic disaster since the Stock
Market Crash of 1929. It started with a subprime mortgage lending
crisis in 2007 and expanded into a global banking crisis with the failure
of investment bank Lehman Brothers in September 2008. Huge bailouts
and other measures meant to limit the spread of the damage failed and
the global economy fell into recession.
 As it was the most damaging financial crisis event, the Global Financial
Crisis, deserves special attention, as its causes, effects, response, and
lessons are most applicable to the current financial system.

10. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
CAUSES OF GLOBAL FINANCIAL CRISIS 2008
 LOOSE MONETARY POLICY AND LOW INTEREST RATES - FED
reduces interest rates from 6.5% in 2000 to 1% in 2003.
Foreigners increased holdings of US Treasury bonds,
increasing liquidity. Proceeds mainly went into housing
market.
 FINANCIAL DEREGULATION - In 1999, President Clinton
abolishes Glass-Steagall Act of 1933, separating commercial
banking from investment banking.

11. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
 SUB-PRIME MORTGAGES - CDS AND CDO contributed in this. Subprime families could not
able to pay their loans because of various reasons and ultimately US housing Bubble burst.
 GLOBALISATION - This was the most drastic one as many countries invested in United
States and with the fall of United States economy risk were very high due to global
connectivity and financial system.

12. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
EFFECTS OF GLOBAL FINANCIAL CRISIS 2008
 It was also the longest since 1929 Depression, lasting 18 months (December 2007 June
2009). The subprime mortgage crisis was the trigger. That created a global banking bank
credit crisis.

13. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
 Banks are all facing a problem of having less credit for lending money, since so many people
cannot pay back the mortgage loans, and since other financial institutions have failed. Other
banks now will not lend to them.
 Unemployment reached 10% in USA and many
countries went bankrupt and World trade falls
by 40% in 2008.

14. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
 Crisis has caused panic in financial markets and encouraged investors to take their money
out of risky mortgage bonds and equities also Financial institutions like Lehman Brothers
going bankrupt and Fannie Mae and Freddie Mac being taken under government control.
THE GLOBAL ECONOMY FACES AN ENORMOUS SLOWDOWN

15. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PERSON BEHIND FINANCIAL CRISIS 2008
 Alan Greenspan was the Chairman of the Federal Reserve of the United States from 1987
to 2006. He was appointed by President Ronald Reagan in August 1987 and was
reappointed by President Bill Clinton in 1996. He was, perhaps, the person most singly
responsible for the housing bubble in the United States.
 The recession officially ended in the second quarter of 2009, but the nation's economy
continued to be described as in an "economic malaise" during the second quarter of 2011.
 Bailout of United States financial system helped economy to revive.

16. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
EVERYONE AFTER KNOWING THAT ALAN WAS THE PERSON RESPONSIBLE FOR
THE HOUSING BUBBLE IN UNITED STATES :
 Credit rating agencies were also the main accused as all the derivatives such as CDS, MBS etc,
plus all the investment banks (including Bear Stearns and Lehman) had been given AAA ratings
as "safe investments.

17. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
PRESENTATION PREPARED BY : KSHITIJ JAISWAL
CONCLUSON
 From the above argument it can be noted down that the
economic meltdown was the shear consequences of greed
and to make too much profit' on the part of wall street
firms and investment banks. This crisis also shows the
failure of capitalist market economy.
 Tough the Indian economy would be able to withstand.
 It can be turned into a great opportunity for growth in
India.

18. PRESENTATION PREPARED BY : KSHITIJ JAISWAL
THANK YOU FOR LISTENING ATTENTIVELY!