What Caused the 2008 Financial Collapse? Finance Industry: Goldman Sachs, JP Morgan (2010)
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The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions. CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1 2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets.[118] As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's became worthless. This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this provided the ground for fraudulent acts, misjudgments and finally market collapse.[120] In 2005 a group of computer scientists built a computational model for the mechanism of biased ratings produced by rating agencies,[121] which turned out to be adequate to what actually happened in 2006–2008.[citation needed] Martin Wolf further wrote in June 2009 that certain financial innovations enabled firms to circumvent regulations, such as off-balance sheet financing that affects the leverage or capital cushion reported by major banks, stating: "...an enormous part of what banks did in the early part of this decade – the off-balance-sheet vehicles, the derivatives and the 'shadow banking system' itself – was to find a way round regulation." http://en.wikipedia.org/wiki/Financial_collapse_of_2007%E2%80%932008
Comments
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Favor legendar em português!
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B L A T A N T F U C K I N' L I A R S
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How ironic, Here's Blankfein, who knew what was happening all along and probably participated in it, is instructing Congress. Hillary was right: let the "experts" i.e., the criminals who ruined millions of lives can govern themselves.
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i12345678????yes.uuuueieio?0.0%u?IU@me?what are the motherfuckingodds?YOU.uuuiipppp.texas indepedence day.dr seuess was born in the year of the spartan.
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"...home ownership recognizing the socialite benefits" psst 😒
the nerve of them to act like that's what they actually cared about -
HANG ALL THESE BASTARDS IN PUBLIC
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Now we know who turned on the hurrycanes, lol....or not....for the people......
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If there will be another financial crisis, I strongly believe that these banks will not get bailed out. If this does happen, there will be riots in cities across the globe
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Millions of people need to march to the private homes of these disgusting criminals and put them on the street, our tax dollars payed for everything they got.
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Scumbag. SCUMBAG. Scumbag.
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i love this 2008 financial collapse era -- great times.
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Just like the Godfather
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It's not What but Who caused the financial collapse?
jews of course, who else?
Bailout time again and again
while these parasites get rich
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