The Subprime Collapse

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Information about The Subprime Collapse
Finance

Published on October 21, 2008

Author: DanHrstich

Source: slideshare.net

Description

Just a short piece on the credit crisis.

The Subprime Collapse

Subprime Lending means giving loans to people who are high risk.

including No Income, No Job and No Assets

Or… Ninja Loans

Banks sold loans and credit risks to investors called Securitization .

Why?

“…increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people.” New York Times, September 30, 1999

Greed

The Financial Perfect Storm

Dramatically cut interest rates

encouraged more borrowing.

increasing home ownership,

consumer spending & house prices

House prices increased at a much higher rate to median household income

House prices became unaffordable

In 2005

43% …of 1st time buyers made no down payments at all.

People with poor credit found it…

difficult to pay their mortgage.

Properties with foreclosure activities.

The two giants in securitization…

collapsed.

Wall Street was Greedy .

Short term profit was more important than the good of the people.

Chief Executive Lehman Brothers Richard S. Fuld, Jr. Earned $34.4 million in 2007.

declared bankruptcy.

Congress did not act in time.

We all pay the price.

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