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  • Subprime Crisis

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    Bulbul Sharma
    1K Ansichten11 Seiten
    The document discusses the subprime crisis, including: 1) The subprime crisis occurred when many homeowners with subprime loans (loans given to those with low credit scores and incomes) were unable to repay their loans, leading to widespread foreclosures. 2) Subprime loans have higher interest rates than prime loans given to those with good credit. 3) Factors that contributed to the crisis included a fall in interest rates, a rise in home prices, and increased subprime lending. 4) The effects of the crisis included huge losses for banks, a drop in home prices and construction, and investors shunning complex financial assets in favor of simpler investments.

    Originalbeschreibung:

    it about how sub prime crisis starts and what is current situation

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    The document discusses the subprime crisis, including: 1) The subprime crisis occurred when many homeowners with subprime loans (loans given to those with low credit scores and incomes) were unable to repay their loans, leading to widespread foreclosures. 2) Subprime loans have higher interest rates than prime loans given to those with good credit. 3) Factors that contributed to the crisis included a fall in interest rates, a rise in home prices, and increased subprime lending. 4) The effects of the crisis included huge losses for banks, a drop in home prices and construction, and investors shunning complex financial assets in favor of simpler investments.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Als PPT, PDF, TXT herunterladen oder online auf Scribd lesen
    Markieren Sie unangemessene Inhalte
    1K Ansichten11 Seiten

    Subprime Crisis

    Hochgeladen von

    Bulbul Sharma
    The document discusses the subprime crisis, including: 1) The subprime crisis occurred when many homeowners with subprime loans (loans given to those with low credit scores and incomes) were unable to repay their loans, leading to widespread foreclosures. 2) Subprime loans have higher interest rates than prime loans given to those with good credit. 3) Factors that contributed to the crisis included a fall in interest rates, a rise in home prices, and increased subprime lending. 4) The effects of the crisis included huge losses for banks, a drop in home prices and construction, and investors shunning complex financial assets in favor of simpler investments.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Als PPT, PDF, TXT herunterladen oder online auf Scribd lesen
    Markieren Sie unangemessene Inhalte
    von 11

    Presented By,

    Bulbul Sharma
    Presentation Scheme

     Meaning of Subprime Crisis

     Subprime Lending versus Prime Lending

     Road to Subprime Crisis

     Effects of Subprime Crisis

     Conclusion
    What is Subprime Crisis?

    “Borrower fails to repay his/her Subprime


    loans”
    Prime Lending Versus Subprime Lending

     Issued to household with  Issued to households with


    highly rated credit histories. low incomes and assets, and
    with troubled credit
    histories.
     Low interest rate
     High Interest rate

     Called "A-paper" credits.


     Called “B-paper” credits
    Road to Subprime Crisis…
    National
    Partners in
    Fall in Interest Rise in house More Subprime
    Home
    rate price lending
    Ownership,1994

    Reduce in
    Write off as Increase in
    demand and
    Bed Debts Fails to pay Interest
    Fall in House’s
    Rate
    price
    Effects of Subprime Crisis

     On Banking Industry

     In 2008 the loss is


    estimated like 280
    billion US Dollars.

     For example: UBS AG


    Bank has suffered $37.7
    billion, Citibank – $39.1
    billion.
    Contd..
     Real Estate

     At the end of 2007 home


    prices had fallen
    approximately 8% from their
    peak in 2006.

     Construction of houses
    dropped in the same period
    Contd…
     Risk Preferences

     Structured assets of all ratings grades are being shunned in


    favor of simpler cash securities.

     For Example: Bear, Stearns collapse


    Conclusion

    “Currently new regulations is the best way to deal with the


    system, preventing banks to have risky operations will
    decrease the chance of having crisis in the future. FED should
    also extend its powers.”

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