THE SUBPRIME MORTGAGE CRISIS. PLAN. INTRODUCTION I. Origins II. Transmission III. Contagion Conclusion & Impact of the crisis. INTRODUCTION. Definitions and preview of the conjuncture. The subprime mortgage crisis is a global and financial crisis.
Definitions and preview of the conjuncture.
How did it happened ?
From where did it comes ?
How did it work ?
Where did it go ?
Contagion at the financial markets, the US economy and on a worldwide scale
Strong contagion effect.
Banks have been heavily touched because they financed companies specialized in financing activities.
By November 2008, US stocks had lost 45% of their value compared with 2007 value.
In the second half of 2007, many mortgage companies shut down, suspended operations or were sold.
Several billions dollars were lost by banks because of assets depreciation related to the subprime mortgage crisis.
Citigroup (USA) - $24.1 bln
Merrill Lynch (USA) - $22.5 bln
UBS AG (Switzerland) - $16.7 bln
Morgan Stanley (USA) - $10.3
Credit Agricole (France) - $4.8 bln
HSBC (United Kingdom) - $3.4 bln
Bank of America (USA) - $5.28 bln
CIBC (Canada) – 3.2 bln
Deutsche Bank (Germany) - $3.1 bln
- Dow Jones: 14.000 points to the 19/07/2007 against
12.800 points to the 16/10/2007.
- CAC 40:
6 125 points to the 16/07/2007 compared with 5.265 to
Subprime crisis financial crisis asset price deflation liquidity/credit crunch
The most important impacts are made in developed countries especialy in US and europe.
The American banking crisis are transformed into a financial and economic crisis which affects the worldwide economy
Decrease of credits given to companies of householders Consumption, Investment and GDP slowed down Recession
Risky householders became more and more vulnerable (1.200.000 in August 2007) Devalorization of real estate patrimony. Same impact on GDP.
The decrease of real estate prices slows down the industry activity.
Bankruptcies & Unemployment.
3 of the 5 biggest wholesale banks in Wall Street are changes hands in few months.
In March2008, Wall St investment banks Bear Stearns dies purchase by JP Morgan Chase.
In Sept 2008, Lehman Brothers collapses, Merrill Lynch is purchased by Bank of America.
In Sept 2008, AIG collapses as it could not afford to pay for all of these US mortgage defaults. The US government nationalizes AIG by becoming 80% shareholder.
Government sponsored Fannie Mae and Freddie Mac either directly owed or guaranteed nearly $5 trillion in mortgage obligations.
By ANGELIER Damien & SERRAT Léo
Video : explained by Damien & Léo.
Directed by George LUCAS
Staring : Steven SPIELBERG.