The 2008 financial crises Introduction The financial meltdown which happened in 2007-2008 is considered to be a huge financial crises as it led to an economic recession throughout the world. That is the reason why this topic has been chosen for the study. The exposition here will first throw light on the factors that contributed towards the recession. I believe that certain steps could have been taken to avoid the build-up of the financial meltdown and the second part of this exposition would
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by the individuals was “confirmation trap”. Credit rating agencies rated MBS as “AAA” implying they were as safe as US Treasury Bonds which were the traditional investment choice of the global pool of money. The data used for this rating was based on relatively recent history of mortgages with low foreclosure rates. However this data did not apply to the new kinds of mortgages that were being issued. [1] The use of irrelevant data caused credit agencies to misrepresent the risk that the mortgages
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|Securitization | | | |Project for Final Evaluation | | | |6/13/2009
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accessibility of credit set the stage for the meltdown. II. Body Paragraphs A. In 2000 when President Clinton was in office, he signed the Commodity Futures Modernization Act which led to the unregulated trading of the Credit Default Swaps (CDS). B. Sub-prime originators invented the mortgage to sell them. C. Buyers of sub-prime MBS (and related CDOs) over-relied on ratings agencies- often buyers, particularly AAA buyers, did little independent credit work.Rating agencies such as Moody’s
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individual party’s action causes the others to step deeper into the problem. As define by investopedia, sub-prime is “a classification of borrowers with a tarnished or limited credit history. Lenders will use a credit scoring system to determine which loans a borrower may qualify for. Subprime loans carry more credit risk, and as such, will carry higher interest rates as well.” The US subprime mortgage crisis was the catalysis of the finical crisis and subsequently cause the recession that began
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Role of Structured Credit Products in the Recent Financial Crisis Abstract In 2008, the world faced the most serious financial crisis since the Great Depression of 1930s. The collapse of the housing bubble and the increasing default rates on subprime mortgages in 2006 triggered liquidity constraints and the insolvency of firms which were priorly considered “too big to fail”, set off a domino effect across the US and global financial markets. Although it has been suggested that the causes of the
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implemented by this giant institution to overcome the distress. An analysis, backed by the study of the overall mishap suggests that, providing Citigroup with independent risk management, credit rating of its internal departments with stricter regulations, audits and checking rather than profit oriented private rating agencies and deeper focus on future strategies would act better as measures to prevent recurrence of such crisis and to eradicate the impact of the happened crisis in Citigroup. Until the
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* Healthy and sound financial system plays an important role in achieving sustainable development and economic and political stability in both developed and underdeveloped economies. * Financial institutions play an important role in economic and financial environment of any country. * An essential element in the health of any financial system is the soundness of its institution. * As the value of the bank’s assets decreases or the percentage of non-performing loans increases a deduction
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The bond market is a less known in the financial world than the share market, but it doesn’t mean that it is not as important as the share one in terms of volumes. The main reason may be that the Governments are a big part of this market. Because unlike a share, a bond is a debt contract not a proportion of capital. Usually, the international bond market is divided in three entities: the domestic bonds, the foreign bonds and the Eurobonds. The Eurobonds segment of the international market is, according
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6063 April-16-2012 Instructor: Dr. David Alldice Contents A- Introduction 3 B- Causes of financial Crisis 2007-2008 3 i- Role of mortgage lenders 4 ii- Role of mortgage Borrowers 5 iii- Role of investment bankers 5 iv- Role of Credit rating agencies 7 v- Role of CDO Investors and hedge funds 8 C- Impact of crisis on financial institutions and Lehman Brothers 8 D- Measures to mitigate financial crisis 11 E- Conclusion 15 F- References 17 A- Introduction The subprime mortgage
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