2008 This draft: May 2009 John C. Hull* Joseph L. Rotman School of Management University of Toronto Abstract This paper explains the events leading to the credit crisis that began in 2007 and the products that were created from residential mortgages. It explains the multiple levels of securitization that were involved. It argues that the inappropriate incentives led to a short‐term focus in the decision making of traders and a failure to evaluate the risks being taken. The products that were created lacked transparency with the
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Jacqueline Teo Hui Yun 15805054 Ting Heng Huat 14973837 Tutor: Leo Kee Chye Tutorial Day / Time: Monday / 2pm Table of Contents Abstract The Tech Bubble Introduction Lowering of Interest Rates Adjustable Rate Mortgage Securitization Mortgage Backed Securities Collateralized Debt Obligation Credit Default Swap Government Reaction and Policies Emergency TARP Repercussions Basel Disadvantages Future Policy Requirements Controversy Conclusion Reference
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In addition Lehman Brothers declared bankruptcy after it was unable to find a buyer. Furthermore, Merrill Lynch was purchased by Bank of America, and American International Group was bailed out by the federal government with an $85 billion dollar capital injection. Shortly after, Washington Mutual (WM) went under; however, J P Morgan Chase (JPM) agreed to purchase the assets of WM resulting in the largest bank failure in the history of the United States. Due to the failures stated above it brings
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Northern Rock Bank: an english exemple of the sub-prime mortgage crisis Brief introduction: The Northern Rock-one of the UK's largest mortgage lenders has become the highest profile UK-based victim of the fallout from the global credit crunch, which stemmed from the sub-prime mortgage crisis in the US. The Bank of England has agreed to give emergency financial support to the Northern Rock and it avoided from going bust. I. History of the bank Northern Rock Building Society was formed in 1965
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continuing subprime mortgage crisis in 2008. According to Jenny Anderson and Erick Dash’s article, “For Lehman More Cuts and Anxiety”, Lehman's loss was a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages. During the years of the housing boom Lehman Brothers was increasing its revenue. They were increasing their profits from all of the home mortgages. Leman Brothers acquired subprime mortgage lenders. Between
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significant rise in mortgage delinquencies and foreclosures, leaving repercussions for banks and financial markets globally. The subprime mortgage crises started to become apparent in 2007 resulting in a weakening global financial system. An estimated 80% of US mortgages held by the subprime borrowers were adjustable rate mortgages. Once housing prices reached their peak during the middle of 2006, the steep decline that followed made refinancing difficult. Adjustable rate mortgages began to reset
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Racism is defined as the poor treatment of or violence against people because of their race. In America, images of slavery and the Civil Rights Era would quickly display that racism is a topic from our past. However, the second part of the racism states that it is a belief that some races are better than others. The belief component of racism is still a major factor in our society. Images of these racial beliefs cannot be googled, but the current conditions of minorities are always captured in
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Global Financial Crisis: The 2007–2012 global financial crisis, also known as the Global Financial Crisis (GFC), late-2000s financial crisis or the second "Great Recession", is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.[1] It resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. In many areas, the housing market also suffered, resulting in
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since the 1930’s. As a result, many people are losing their jobs and some companies are filing for bankruptcy. There are many causes that may have led to this financial crisis. Some include Bush’s investment in the Iraq war, subprime lending awards mortgages to people with poor credit, defaults on loans force banks to raise equity, but most importantly, greed. Not only is there a crisis going on in the United States, but there is a crisis occurring globally also. Bush and his investment in the
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Eco 360 writing requirement Jing He ID: 107302852 The causes of subprime crisis during 2007-2008 In America, according to the borrower’s credit rating, housing mortgage loan can be divide into prime, alt-a and subprime loan. Subprime mortgage loan is one of the important bank businesses. It is a high return but also high risk industry. Basically the loan is related to customers’ credit and reimbursement ability. Bank credit reports include the name, employment, credit, loan history and collection
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