SLOW DOWN IN ECONOMY 2008. Prepared by CA Neha Awasthi. Introduction. Now a days everybody talks about ,Economic Crisis, Slowdown, US Economy Meltdown, Jobs Cut, Industrial Loss. We all know that market have Slumped. People talks about at least 24 month of Recession, jobs losses.
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CA Neha Awasthi
Do you Know why suddenly Indian Market get affected by US Economy slowdown?
What was the Reason for GLOWBLE RECESSION ?
What is Subprime Mortgage Crisis ?
– FICO score of 620 or below
– FICO score is a measure of past credit history
– Compares the value of the loan to market value of the property
– Indicator of borrower leverage
– Compares monthly loan payments to monthly income
– Indicator of income adequacy
– Verification of income is less rigorous
Sub Prime Loan
Step 1-Borrower obtains a Loan from Lender with the help of Mortgage Broker.
Step 2-Lender Sells the Loans to Issuer an Borrower Begins Monthly Payments to Servicer.
Model Of Securitization
Step 3-The Issuer sells the Securities to the investor, Underwriter assist in sale, credit Rating Agencies Rate the Securities, Credit Enhancement may be provided.
Step 4-The Servicer collect Monthly Payments from the Borrower and remits the same to the Issuer. The Trustee and the servicer manage the delinquent loans according to the Pooling And service Agreement.
Financial Institutions – Bankruptcy
Financial Institutions – Write-Downs
By 02/19/08 losses or write-downs > U.S. $150 bln
Be expected exceeding $200 - $400 bln
1. Economic Stimulus Act of 2008:
2. Housing and Economic Recovery Act of 2008
3. Emergency Economic Stabilization Act of 2008
• commonly referred to as a bailout of the U.S. financial system, is a law
authorizing the United States Secretary of the Treasury to spend up to US$700
billion to purchase distressed assets, especially mortgage-backed securities, and
make capital injections into banks
• The bailed-out banks are mostly U.S. or foreign banks, though the Federal
Reserve extended help to American Express, whose bank-holding application it
• The Act was proposed by Treasury Secretary Henry Paulson during the global
financial crisis of 2008.
• The bill, HR1424 was passed by the House on October 3, 2008 and signed into
Key Lessons for Governments
Don’t worry – what goes down will always go upMarkets will rebound – these tips will prepare you to be a winner