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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
The global financial crisis

The Global Financial Crisis


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


  • 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



Nobody was getting declined from getting the loans they wanted
Nobody was getting declined from getting the loans they wanted.



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


Solutions to the financial crisis

Solutions to the Financial Crisis


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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