Following Presentation deals with brief outline over what is known as "Global Recession". It has novice friendly language and attention seeking approach.

1. GLOBAL RECESSION 2008
Is it really 2008 or was the seeds sown way before
-Shikher Kaushik

2. RECESSION
Recession is two consecutive quarters of negative economic growth as
measured by a country's gross domestic product (GDP)
 Generally lasts from 6 to 18 months
Global recession of 2008-2009 Subprime Lending Crisis

3. REASONS FOR START
 Dot com Bubble
 Terrorist Attacks( 9/11)
This triggered an individual dream of
Buying a new house .
Was it really “Buying” or “Something Else”
Led
To
Decline in interest rates from
6.5% in may 2000 to 1.75% in
December 2001
further
In June,2003 Federal
Bank lowered Interest
rates to 1% (lowest in 45
years)

4. MORTGAGE “TEASER” INTEREST RATES( “LICK
YOUR CANDY NOW AND PAY FOR IT LATER”)
 Lax Lending Standards
Asymmetric Information - Broker did not fully knew
the credit worthiness of the borrower
Subprime mortgage originators grew from
$173 billion in 2001 to record level of $665
billion in 2005..?
What is that ?
It means increase of nearly 300%
Subprime?
2/28

5. HOUSING BUBBLE MARKET
 Bubble ?? Wo Pani Wala
Mean Reversion
Law of Finance says that
“MARKETS” that go through
periods of rapid price appreciation
or depreciation will ,in time, revert
to price point that puts them in
line with where their long term
average rates indicates they
should be
Supply
Demand
Supply is slow to react because
Why ? Because it takes time to
build a house and in highly
developed areas , ZAMEEN
Kha Se Laoge ??

6. EVEN COIN HAS TWO FACES PHIR YE TOH
$ HAI
June 30,2004, Fed started raising rates
US homeownership peaked at 70%
No one was buying or eating more
Candy which led to 40% decline.
1%
By
2004
5.25%
2003
2006 and
remain
unchang
ed till
2007

7. DECLINE
Many Subprime borrower could not withstand
“Interest Rates”
2007 started with bad news from multiple sources.
Every month one subprime or another was filing for
bankruptcy
25
MAR
FEB
Default
Subprime lenders filed for
bankruptcy

8. WHERE LIES THE REAL PROBLEM
Their were many parties involved
 Lenders
 Homebuyers
 Investment Banks
 Investors
 Insurance Company

9. Loan(Sub Prime People)
Originator SPV
MBS
Investment Banks
Loan Documents
Bonds
Insurance Company
(AIG)
“Tranches”
Credit
Rating
Agencies
Gave AAA
Ratings
• Lehman Brothers
• Bear Stearns
• Merrill Lynch
• Fannie Mae
• Freddie Mac
• JP Morgan Chase
• Morgan Stanley
CDS
CDO
Premium

10. CATASTROPHIC CONSEQUENCES
 September 2007 - Northern Rock goes Bankrupt
 March 28,2007 - U.S. 5th largest investment bank Bear
Stearns bought by JP Morgan Chase
 September11,2008 – U.S. 4th largest bank Lehman Brothers
shut down with the largest bankruptcy of all times $613 billion
 September17,2008 – World’s biggest Insurance company
AIG saved by U.S. Govt by $USD 85 Billion
 Merrill Lynch was sold to Bank of America
 Fannie Mae and Freddie Mac were put under the control of
U.S. federal government
Solid asset
Barclays Bank
(British Bank)
American Banks
Questionable Parts

11. TROUBLE ASSET RELIEF PROGRAM
 September 18,2008
 $10 Billion MERRILL LYNCH
 $10 Billion GOLDMAN SACHS
 $25 Billion JP MORGAN CHASE
Meeting for Bailing out
Financial Institution
Ended in Vain
As situation worsened,
TARP came to the rescue
Congress
turned down
the Plan

12. FINANCIAL CRISIS ENQUIRY COMMISSION
U.S.
 Phil Angelidas
Former California
Treasurer
• Federal Bank Governor
• 1987-2006
Alan
Greenspan
• U.S. Treasury
Secretary(2006)
• EX CEO of Goldman Sachs
Hank
Paulson
Hint about the
impending
Storm
Could have
saved Lehman
Brothers

13. MAJORLY AFFECTED ECONOMIES
EU
Britain
DubaiIreland
China
Got
Bankrupt
August
2007,
Northern
Rock
“No
bailout for
you”
15
million
jobless
BNP PARIBAS Received the alarm in
August 2006 when it found out that
many of it’s investment were filled by
U.S. Toxic Security

15.  ABSTRACT
“The Great Recession of 2008-2009”
Sher Verick
Employment Analysis and Research Unit(EMP/ANALYSIS)
International Labour Office(ILO)
 Investopedia
 You tube
https://www.youtube.com/watch?v=92OT2HwKeyo