intro to financial crisis 0.0 / 5 ? EconomicsgUniversityAll boards Created by: charlieCreated on: 09-05-16 21:48 created: securitisation/ mortgage backed securities investment banks buying lots of mortgages + lumping together, then slicing them into (SAFE/OKAY/RISKY) sell to investors at different IR 1 of 10 created: secondary market (FM+FM) FM+FM buy mortgages from banks + sell them to people to buy homes (credit)/ due to Wall st. offering bad loans so did FM+FM= crash 2 of 10 created: subprime borrowers bad credit rating 3 of 10 created: alt-a borrowers gain loans without declaring their income 4 of 10 Bubble burst house prices kept on rising, FED didn't want infl, raised IR, which caused asset prices to dec 5 of 10 Effects: banks fell heavily due to all home owners defaulting on mortgages 6 of 10 Response: FED IR lowered + partial ownership of banks 7 of 10 created: role of oil prices 2008 oil prices inc=cost inc=market prices inc=inc infl 8 of 10 Effects: credit crunch high unemployment + banks toughened standard on loans=no money causing credit crunch 9 of 10 Effects: GDP growth decreased resulting in DEBT (sovereign debt crisis) 10 of 10
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