The document summarizes the sub-prime mortgage crisis of the late 2000s. It describes how risky sub-prime mortgages were packaged and sold as securities by investment banks, fueling a housing bubble. When borrowers started defaulting, it led to huge losses at major financial institutions, the bankruptcy of Lehman Brothers, and the acquisition of Merrill Lynch. The crisis spread globally and resulted in the Great Recession, with impacts like millions of foreclosures and a 20% drop in home prices. Governments enacted legislation to regulate derivatives and assist homeowners.

1. SUB-PRIME
CRISIS
1
Presented To:
Prof. S.K. Singh
Presented By:
Snehil Agrawal

2. Home Owners Investors
Mortgage Money
Houses
Institutions
Pension Funds
Insurance
Companies
Sovereign Funds
Mutual Funds
Here Is How It
Goes
2
Wall Street

3. Federal Reserve
Treasury
Bills
3

4. BUTOn September 11Federal Reserve
1% No Thanks
4
Allan Green Span

5. 5

6. SAFE
OKAY
RISKY 10%
7%
4%SAFE
OKAY
RISKY
Safe
Investors
Bankers
Hedge Funds
6

7. DefaultDefault
7

8. No Down
Payment
No
Document
No Proof
Of Income
SUB PRIME
MORTGAGE
=
8

9. No Repayment
Banks going
BANKRUPT
9

10. 10
Major banks suffered from huge losses
Lehman Brothers went out of business
Merrill Lynch had to sell itself to Bank of America for a
fraction of its former value
Countrywide Financial Corporation, the biggest U.S.
mortgage lender, eventually gets taken over by Bank of
America
The Federal Reserve began guaranteeing loans to Bear
Stearns and other banks to prevent an all-out financial
failure
Mortgage defaults led subsequently to the collapse and
government rescue of Fannie Mae and Freddie Mac.
Impacts of the Subprime Mortgage Crisis

11. 11
 There was a total of 2.2 million foreclosures in 2007, up
75% from the roughly 1.26 million Realty Trac reported in
2006
 RealtyTrac said 1% of all US households were in 'some
stage of foreclosure' in 2007, up from 0.58% in 2006
 By the end of 2008, home prices had dropped 20% from
their 2006 peak.
Impacts… Continued…

12. 12
Many programs have been enacted and legislation passed to
help those who have been hit the hardest by the crisis.
Example : The Emergency Economic Stabilization Act,2008
&
The Homeowners Affordability and Stability Plan
Former President Bill Clinton and former Federal Reserve
Chairman Alan Greenspan indicated they did not properly
regulate derivatives, including credit default swaps
A bill called The Derivatives Markets Transparency and
Accountability Act,2009 was proposed to further regulate the
CDS market. This bill provided the authority to suspend
CDS trading under certain conditions.
Responses of the Crisis

13. 13
Thank You…
References :
https://www.youtube.com/watch?v=bx_LWm6_6tA
http://en.wikipedia.org/wiki/Financial_crisis_of_2
http://en.wikipedia.org/wiki/Subprime_mortgage_cri
https://www.Slideshare.com