The document outlines the subprime mortgage crisis and its economic impact, highlighting key statistics such as housing prices falling by 31.8% and unemployment exceeding 9% in 2010. It details the extensive financial bailouts totaling $1.488 trillion and the collapse of major institutions like Lehman Brothers, which precipitated a loss of trust among banks and led to the 2008 financial crisis. It also discusses the aftermath and ongoing concerns within the financial sector, including regulatory challenges and the resurgence of complex financial instruments.

1. Subprime
Mortgage Crisis
Your Company Name

2. 2008 Financial Crisis Impact Explained in Numbers
2
01 Housing Prices fell 31.8%
02 Unemployment was still above 9% in 2010
03 $30 Bn federal guarantee for deal between JP
Morgan Chase & Bear Stearns
04 $182 Bn federal bailout for AIG
05 Fannie Mae & Freddie Mac guarantee 90% of
all mortgages
06 Treasury department spent $439.6 Bn buying
bank & car stocks
07 $144.5 Bn moved from money market to
treasury bonds
Source: The Balance 2020
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3. Major Financial Bubble Burst of all Times
3
NASADQ & the
Internet boom
Fell 30% 1 month after
record high
2000
Nikkei 225
20-year bear market,
losses hit 82%
1989
Precious Metal
Silver fell 66% in 2
months
1980
Dow Jones
Industrial Average
Losses neared 90%
by 1932
1929
US Housing Market
Homebuilding stocks
lost 90%in value
2005
Crude Oil
Dropped 77% in 6
months
2008
Precious Metals
Silver fell 25% in 5 Days
2011
Bitcoin
Loss of 25% in
just 1 day
2020

4. Note: 1Bank of America acquired Merrill Lynch in September 2008; 2Lehman filed for bankruptcy and sold it’s investment
banking business to Barclays & Nomura
Impact of the Great Recession on Investment Banks
4
Rank in 2007 Investment Bank Rank in 2020
1 Goldman Sachs 2
2 Deutsche Bank 6
3 Morgan Stanley 4
4 Citi 2
5 JP Morgan 1
6 Credit Suisse 7
7 UBS 10
8 Merrill Lynch1 NA
9 Lehman Brothers2 NA
10 Barclays 7

5. 2008 Financial Crisis Cost
5
Bear Stearns Bailout
US$ 30B
Fannie & Freddie Bailout
US$ 187B
APRA Tax Cuts & Spending
US$ 831B
TARP Bank Bailout
US$ 440B
Total
US$ 1,488B
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6. Key Figures of the Crisis
6
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John Thain
Then: Chairman & CEO, Merrill Lynch
Now: Member of Supervisory board, Deutsche
bank AG
Jamie Dimon
Then: Chairman & CEO, JP Morgan Chase &
Co
Now: Same
Richard Fuld
Then: Chairman & CEO, Lehman Brothers
Holdings
Now: Founder, Chairman & CEO Matrix
Investment Management
Ben Bernanke
Then: Chairman, Federal Reserve
Now: Senior advisor to Citadel, a hedge fund
Timothy Geithner
Then: President, Federal Reserve bank of
New York, and later, treasury secretary
Now: President Warburg Pincus
Hank Paulson
Then: US Treasury Secretary
Now: Chairman of Paulson institute, a think tank he
set up at the University of Chicago in 2011
02
03
01 04
05
06

7. Before the Beginning
7
In 2001, the U.S. economy underwent a minor,
short-lived recession.
What different functions or task can
the product perform
It wasn't long before things started to move
just as the cheap money wanted them to
These subprime borrowers wanted to
realize their life's dream of acquiring a
home
To make things merrier, in October 2004, SEC relaxed the net capital
requirement for five investment banks - Goldman Sachs, Merrill
Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley - which
freed them to leverage up to 30-times or even 40-times their
initial investment.
This easy and excess money found its prey in restless
bankers and borrowers with little or no income; also
referred as Subprime borrowers (Explained in Appendix)
To keep recession away, the Federal Reserve lowered
the Federal funds rate 11 times - from 6.5% in May
2000 to 1.75% in December 2001 - creating enormous
liquidity in the economy
Although the U.S. economy nicely withstood terrorist attacks,
the bust of the dot-com bubble and accounting scandals, the
fear of recession was the top concern for everyone.
Before
the
Beginning

8. What Happened then?
8
This environment of easy credit and the upward spiral of home prices made
investments in higher yielding subprime mortgages look like a new rush for gold
Even this wasn’t enough, what was going to happen next worsened the situation
This environment of easy credit and the upward spiral of home prices made
investments in higher yielding subprime mortgages look like a new rush for gold.
The mortgage lenders wanted more money to lend to homebuyers, so they sold
their existing loans to banks and to Freddie Mac and Fannie May, which in turn
sold these to investment banks

9. How did it Spread?
9
The investment banks combined these loans with hundreds of others into what are known as collateralised debt obligations (CDOs) (Explained in Appendix) and sold these to investors
worldwide as mortgage-backed securities (MBS)
The returns depended on monthly payments on the loans
CDO issuance hit $634 billion in 2007.
Credit Rating agencies called these sound
investments, when they were not. No surprise there,
as the investment banks were their clients.

10. How did those who Bought CDO Protect themselves?
10
This is where another
infamous term from
the crisis comes in:
credit default swaps.
Insurance companies
used these
instruments to cover
investors’ losses if
homebuyers defaulted
on loans.
No one expected the
party to wind down
and so there were no
worries.
They thought an
insurance product
called credit default
swaps protected them.
A traditional insurance
company known as the
American International
Group (AIG) sold these
swaps. When the
derivatives lost value,
AIG didn't have enough
cash flow to honor all
the swaps.

11. Beginning of the End
11
£90bn was wiped off the value of Britain’s biggest companies in
a single day
Housing prices started falling in 2006 and homebuyers began defaulting on
their loans, which meant insurance companies couldn’t honour all their
credit default swaps.
Within a few weeks in September 2008, Lehman Brothers, one of the
world’s biggest financial institutions, went bankrupt
Banks panicked when they realized they would have to absorb the losses.
They stopped lending to each other. They didn't want other banks giving
them worthless mortgages as collateral.
As a result, interbank borrowing costs, LIBOR, rose. This mistrust within
the banking community was the primary cause of the 2008 financial crisis
The Federal Reserve began pumping liquidity into the banking system via
the Term Auction Facility. But that wasn't enough.

12. Subprime Effect
12
Sub-Prime Effect
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USA
France
Belgium
UK
Netherlands
Germany
China
Australia

13. Major Bailout Packages
13
Treasury Secretary took over mortgage
companies Fannie Mae and Freddie
Mac costing $187 billion at the time.
Since then, Treasury has made
enough in profits to pay off the cost.
The Fed loaned $85 billion to AIG as
a bailout. Later, the Fed and
Treasury restructured the bailout and
total cost ballooned to $182 billion.
But by 2012, the government made a
$22.7 billion profit
Bear Stearns approached JP Morgan
Chase to bail it out. The Fed had to
sweeten the deal with a $30 billion
guarantee.
By 2012, the Fed had received full
payment for its loan.
TARP (Troubled Asset Relief
Fund) disbursed $442.6 Bn to
banks for bailout.

14. Banks have Paid Billions of Dollars in Fine
14
Source: Boston Consulting Group; Thomson Reuters
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North American
Banks
63% European
Banks
37%
Penalties paid by banks between 2009 & 2016 is $321 Bn
Recipients of Penalties
56%
38%
6%
Consumers
European Regulators North American Regulators
Sales

15. While the world
economy has recovered
from the crisis and the
Dow Jones Industrial
Average has risen
nearly four times since
its 12-year low in March
2009, big worries
remain:
S&P, Fitch and Moody’s
are still dominant
players, earning more
than $9 out of every $10
in the credit-rating
industry
Top 10 commercial
banks still account for
more than half of the
assets held by 100
largest commercial
banks, similar to a
decade ago
Some complex derivative
instruments vilified
during the crisis are
back in demand. For
instance, synthetic CDOs,
which invest in CDSs,
were expected to
quadruple to $100 bn in
2017 from 2015
US President Donald
Trump wants to
dismantle the Dodd-
Frank Wall Street
Reform and Consumer
Protection Act, a key law
passed in 2010 to tighten
financial regulation in the
aftermath of the crisis
After a Decade – Current Scenario
15

16. Fed Tapering
16
Tapering is the gradual reversal of a quantitative easing
policy implemented by a central bank to stimulate
economic growth.
Tapering refers to the reduction, not the elimination, of
Fed asset purchases.
Tapering prematurely can lead to a recession while
delaying it could lead to an unwelcome rise in inflation
Tapering came to the picture in 2013 when, then Fed
chairman, Ben Bernanke commented that the Federal
Reserve would

17. Quantitative Easing
17
Quantitative easing is 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
Quantitative easing
increases the money
supply by flooding
financial institutions with
capital in an effort to
promote increased lending
and liquidity
Quantitative easing is
considered when short-term
interest rates are at or
approaching zero, and does
not involve the printing of
new banknotes
A central bank can
implement quantitative
easing by purchasing
government bonds from
commercial banks and other
private institutions, which
should lower short-term
interest rates and increase
the capital available to
institutions to promote
increased lending and
liquidity

18. Subprime Mortgage Crisis Icons Slide
18

19. 19
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20. Our Mission
20
Vision
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Mission
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Goal
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21. Our Team
21
Name Here
Designation
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22. Comparison
22
vs
70
%
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Male Users
30
%
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Female Users

23. Our Target
23
Target 01
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Target 02
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Target 03
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24. 30 60 90 Days
24
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30
Days Plan
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60
Days Plan
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90
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25. Financial
25
Minimum
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20%
Medium
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30%
Maximum
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70%

26. Timeline
26
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2013
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2015
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2019
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2017
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2014
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2016
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2018
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2020

27. Thanks for Watching!
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