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The Subprime Collapse
| Date post: | 25-Jun-2015 |
| Category: |
Economy & Finance |
| Upload: | daniel-hrstich |
| View: | 4,018 times |
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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.
Congress did not act in time.
We all pay the price.
