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The Global Financial Crisis. History & Context. 1990s – rapid expansion Unsustainable levels of gearing Benign economic conditions & policies favoring low and long-term interest rates Financial Innovation Increased investors participating in the global market. Credit Crunch.

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Presentation Transcript
history context
History & Context
  • 1990s – rapid expansion
  • Unsustainable levels of gearing
    • Benign economic conditions & policies favoring low and long-term interest rates
    • Financial Innovation
    • Increased investors participating in the global market
credit crunch
Credit Crunch
  • Credit Expansion
    • Excessive Liquidity
  • Breakdown in underwriting standards for sub-prime mortgages
  • Flaws in credit agencies’ rating of sub-prime residential mortgage-backed securities
  • Regulatory policies that failed to mitigate risk management weaknesses
banking
Banking
  • Liberal banking models
  • Poor oversight
  • Shadow banking
mortgages
Mortgages
  • Fannie Mae & Freddie Mac
  • Poor Oversight
  • Evictions
slide6

http://www.youtube.com/watch?v=9I3soaecWj4&feature=related

Overview

  • http://www.youtube.com/watch?v=P-PCyD7e2PI

Banks

loans and their effect on the economy

Loans and their effect on the economy

http://www.cnbc.com/id/15840232?video=1029028275&play=1

House of Cards - Lenders

banks and loan industry made loans to the public
Banks and Loan Industry made loans to the public
  • Wall Street decided these would be high yield loans to invest in
  • Wall Street packaged the loans in what they called CDOs

http://www.bing.com/videos/watch/video/newshour-w-jim-lehrer-solman-s-domino-effect-pt-1-pbs/3248967E3C2B040EE01B3248967E3C2B040EE01B - Dominos

rating companies and the bbb aaa system
Rating Companies and the BBB-AAA system
  • Alan Greenspan
  • World wide sale of CDOs
national losses
National losses
  • 8.3 trillion between 2007-late 2008.
  • http://www.youtube.com/watch?v=lNS8IY_Td14GB Inconvenient Debt
  • http://www.youtube.com/watch?v=U-d9uoIXbZs&feature=related

GB Money Bubble

effects in olympia
Effects in Olympia
  • Vacant businesses
  • Closing restaurantsBatdorf and Bronson
  • Decrease in sales
  • Cutting hours
national level government stimulus

National Level:Government Stimulus

Bailouts – Government money to banks:

Buying “troubled assets”

Stimulus – Government money to people

and businesses to increase spending

National Protectionism – Tariffs and Subsidies

international solutions
International Solutions
  • IMF loans

– Capital available to IMF increased

  • Intergovernmental policy correlation

– EU and US cooperation

local solutions
Local Solutions
  • DON’T BUY A HOUSE YOU CAN’T AFFORD!
                  • Don’t be greedy!
                  • Buy Stuff!
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