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GFC2007

The document discusses the events leading up to the 2008 global financial crisis. It begins in the 1980s when US mortgages became a new asset class for financial institutions and traders. In the late 1990s and 2000s, mortgage-backed securities backed by subprime mortgages grew dramatically. The housing bubble that formed popped in the late 2000s, causing widespread defaults on subprime loans. This led to huge losses for many major financial institutions and the collapse of some investment banks. The crisis then spread globally resulting in a worldwide recession.

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Nur Hidayah Jalil
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98 views15 pages

GFC2007

The document discusses the events leading up to the 2008 global financial crisis. It begins in the 1980s when US mortgages became a new asset class for financial institutions and traders. In the late 1990s and 2000s, mortgage-backed securities backed by subprime mortgages grew dramatically. The housing bubble that formed popped in the late 2000s, causing widespread defaults on subprime loans. This led to huge losses for many major financial institutions and the collapse of some investment banks. The crisis then spread globally resulting in a worldwide recession.

Uploaded by

Nur Hidayah Jalil
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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NUR HIDAYAH BINTI JALIL 1428864

SITI NUR AYUNIE BINTI ADNAN 1520656

SITI NUR NAJWA BINTI HASHIM 1525738

AMIRATUL AZIEMAH BT AB AZIZ 1522476

ATHIRAH NAJIHA BINTI MASTORA 1525666

MOHD TAJUDDIN BIN BAHARIN 1510459


Now let’s get back to the 80’s..

Late 1990s & early 2000- 2004-2007 - there were


1980s-traders and financial
there was a boom in hundreds of US billion
institutions found out that
issuing bonds that are dollars worth of mortgages
US mortgages were a
backed by mortgages, given to individuals with
previously unexploited
known as mortgage- poor credit ratings on
asset
backed securities (MBSs) adjustable rates
Turning point..
Turning point..
Turning point..
Subprime
Mortgage

Collateralized Debt
Obligation

Housing Bubble

The Greedy
• Subprime mortgage is the type of
mortgage that is normally issued by a
Subprime lending institution to borrowers with low
Mortgage credit ratings.
• Low credit ratings -> high risk of defaults

• A structured asset-backed security.


• Pools together all the debt assets- such
Collateralized as mortgages, bonds and loans- and
sold as collateral to investors on the
Debt Obligation secondary market.
• Declining house market -> reduced
demand for these CDOs
Housing •The value of house falling down
•Demand for house decrease
Bubble

• The greediness of Wall Street, investors


to get more profit.
Greedy • Approach to the subprime mortgage.
The Financial
Unemployment
Institutions

Global
Poverty
Recession
Poverty
Financial Institutions -value of house drop, many people lost their wealth
-investors loss confidence in stock -decline in GDP
market -Consumer spending drop, due to lack of cash of
-major bank suffered from huge unwillingness.
losses

BANKRUPTCY
+New century Financial (USA) Apr 07
+American Home Mortgage (USA) Aug 07
+Sentinel Management Group (USA) Aug 07
+Amenquest (USA) Aug 17
+Net Bank (USA) Aug 17
Terra Securities (Norway) Nov 07
American Freedom Mortgage Inc (USA)

WRITE DOWN +HSBC $3.4b


+Citigroup- $24.1b +Bank of America -
+Merril Lynch (USA)- $22.5b $5.28b
+UBS AG (Switzerland) - $16.7b +CIBC- $3.2b
+Morgan Stanley -$10.3b +Deutsche Bank - $3.1b
+Credit Agricole - $4.8b
As financial downturn in US, the recession starts to spread
globally.
Global Several subsidiaries and banking companies had to close.
Recession
Lower growth in industrial countries will mean less demand
for developing countries’ exports.

Unemployment’s rate in the US also shot up to 7.2% in


Unemployment December 2007 and was almost to continue rising into
2009.
By Lehman By US
SOLUTION
Brothers Government
Support banks
A raise of the capital with $4 billion.
Make an agreement with Morgan Stanley
Bailout $700 billion to Banks
Make another deal with Bank of America Freddie Mac and Fannie Mae
Merging with Barclays Troubled Asset Relief Program (TARP)

Stimulus package
Failed Project $800 billion
Cutting tax

Financial reform
Dodd Frank Law
Prevent banks to take subprime
mortgage
Save banks from taking too much risk
THE END

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