Explanation To The Financial Crisis Plaguing Us

Explanation to financial hits us. I have sent this good explanation of IESE Professor Leopoldo Abadia Sonnenfeld Group now on the financial crisis plaguing the markets since I open the subprime mortgage crisis in USA. To know more about this subject visit Cyrus findshadow. While it is true that the crisis is not affecting equally to all sectors (the sale of flights, hotels, travel and English courses do not notice it so much 🙂 has ultimately affect everyone. I have perished training interesting so I thought it was worth it worth reproducing here: CRISIS 2007-2008. The story is as follows: 2001. Internet bubble. The U.S.

Federal Reserve in two years lower borrowing costs from 6.5% to 1%. This dopa a market that was beginning to take off: the housing market. In 10 years, the real price of housing is multiplied by two in the U.S.. For years, interest rates in international financial markets have been exceptionally low. This has meant that banks have seen the business that made them smaller: Daban low interest loans They paid something for the customer deposits (zero if the tank is in current accounts and, if in addition, support collection, paid "less something") but for all, the Net Interest Income ("a" less "b") decreased to someone, then in America, it occurred that banks had to do two things: Give more risky loans, they might be able to charge more to offset lower interest margin by increasing the number of operations (1000 x little more than 100 x bit) As for the former (riskier loans), decided: To provide a type of mortgage customers, "ninja" (No Income, no job, no assets, that is, people with no fixed income without fixed employment, no properties) to increase interest, because more risk Harnessing the real estate boom.

Savings Bank

The levels are: AAA, AA A BBB BB than others, but they are very ill Overall: A Bank or Big Box usually has a rating of AA A Bank or medium, a rating of A On March 3, 2008, Fitch has maintained the rating of the City of Barcelona in AA + rating agencies gave these ratings or were given other names, more sophisticated, but in the end, say the same thing: They called: Investment Grade MBS representing mortgage prime, that is those of least risk (be the AAA, AA and A) Mezzanine, the intermediate (I guess maybe the BBB and BB) Equity to poor, high risk, ie the subprime, that in this racket , are the protagonists Investment Banks placed easily the best (investment grade) to conservative investors, and low interest rates. Other fund managers, venture capital companies, etc, more aggressive. sought, at all costs, higher returns, among other reasons because these lords charge the year-end bonus depending on the profitability. Problem: How to sell MBS of bad managers latter without being noticed too that are incurring excessive risks? 6th Comment: The plot thickens and, of course, the Savings Bank of San Quirze continue making statements Expansion happy and content, discussing the proper functioning of the economy and social work they are doing. Some investment banks were able, from a re-rating agencies (a re-rating, a word that does not exist, but it serves to understand) The re-rating is an invention to raise the rating of bad MBS, which consists of: i. .