The Subprime Collapse

Subprime Lending means giving loans to people who are high risk.

including

No Income, No Job and No Assets

Or…

Ninja Loans

Banks sold loans and credit risks to investors called

Securitization.

Why?

“…increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people.”

New York Times, September 30, 1999

Greed

The Financial Perfect Storm

Dramatically cut interest rates

encouraged more borrowing.

increasing home ownership,

consumer spending

& house prices

House prices increased at a much higher rate to

median household income

House prices became

unaffordable

In 2005

43%…of 1st time buyers made no down payments at all.

People with poor credit found it…

difficult to pay

their mortgage.

Properties with foreclosure activities.

The two giants in securitization…

collapsed.

Wall Street was Greedy.

Short term profitwas more important than the good of the people.

Earned

$34.4 million in 2007.

Chief Executive

Lehman Brothers Richard S. Fuld, Jr.

declared bankruptcy.

Congress did not act in time.

We all pay the price.