introduction to financial crisis

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  • Created by: charlie
  • Created on: 03-05-16 15:33
Creating the bubble
securitisation / secondary market / mortgage-backed securities / loosened standard of obtaining mortgage loan
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securitisation
lumping together mortgages, then slicing into different pieces appealing to different investors
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secondary market
Fannie Mae + Freddie Mac: promotes home ownership, easier to borrow money
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mortgage backed securities
investment banks buy mortgages, lump together and sell to investors at a higher IR
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Bubble burst
housing boom, FED's inc. funds rate, IR inc., asset (house) dec. / Mortgage backed securities value fell / default risk premium charge
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Response from FED
Dec. IR / Partial ownership
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Role of oil prices
inc. 2008 = IR inc / prices oil inc, costs inc, prices charged inc.
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Problems from the crisis
sharp unemployment inc / GDP growth dec / tougher loan standards by banks = CREDIT CRUNCH (no loans obtained)
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Other cards in this set

Card 2

Front

securitisation

Back

lumping together mortgages, then slicing into different pieces appealing to different investors

Card 3

Front

secondary market

Back

Preview of the front of card 3

Card 4

Front

mortgage backed securities

Back

Preview of the front of card 4

Card 5

Front

Bubble burst

Back

Preview of the front of card 5
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