Transcript Document

The World’s Financial Crisis
What Happened and When will it
be Over?
QuickTime™ and a
decompressor
are needed to see this picture.
Robert W. Frentzel
Executive Vice President and Managing Director
The PrivateBank
Discussion Points

State of US Economy

State of the Capital Markets

What does it mean for you?

Question & Answer
State of the U.S. Economy
State of the U.S. Economy
FROM
IRRATIONAL EXUBERANCE
TO
IRRATIONAL ANXIETY
The Future?
“HOPE IS NOT A STATEGY”
New York Federal Reserve President
Timothy Geither
Overview of current Financial
environment

Credit crisis has triggered dramatic deleveraging
cycle

Aggressive government and Central bank
intervention has averted systemic meltdown but
painful adjustment period remains

Some improvement in money markets, but capital
markets remain highly strained

New issuance volume is anemic and credit spreads
still at record highs

Easing cycle is over

Shift toward fiscal stimulus likely to push up longterm rates
The growing cost of the crisis

Credit writedowns exceeding $1 trillion

Government rescue package exceeding $1 trillion
and contingent liabilities of $8 trillion

170,000+ lost jobs in financial services, U.S.
economy lost 2.5 million jobs

Homeowner equity declined by $5 trillion (25%)

World stock market capitalization declined from
$62 trillion to $28 trillion

U.S. stock market capitalization declined from $19
trillion to $10 trillion
Recovery Not expected till late
in 2009
Quarterly Change, Annualized
8%
“Potential”
6%
4%
2%
0%
-2%
-4%
Est.
-6%
2005
2006
Source: U.S. Department of Commerce
Blue Chip Economic Indicators, December
2008; Bureau of Economic Analysis
2007
2008
Credit crisis creates unprecedented
interest rate volatility…
1m LIBOR, Fed Funds, and Prime
Targeted Funds Rate: Active
Monetary Intervention
Target 0 - 0.25%
Source: Federal Reserve
Board
Unemployment at 16 year high
and likely to increase
Source: Bureau of
Labor Statistics
December 2008
“Trillion dollar deficits for years to
come…”
Bear market wipes out five years of
gains…
U.S. market capitalization has declined from $19 trillion to $10 trillion over
the past year.
S&P 500 Index
Feb 2003 - Oct 2007
14% ann gain or 16%
w ith dividends
1800
1600
1400
Jan 1995 - Aug 2000
23% ann gain or 25%
w ith dividends
1200
1000
800
Aug 2000 - Feb 2003
45% correction
Jan 1975 - Jan 1995
10% ann gain or
12% w ith dividends
600
Oct 2007- Nov 2008
44% correction
400
200
Dec-06
Dec-04
Dec-02
Dec-00
Dec-98
Dec-96
Dec-94
Dec-92
Dec-90
Dec-88
Dec-86
Dec-84
Dec-82
Dec-80
Dec-78
Dec-76
Dec-74
0
Not many can afford To retire
*estimates
Sources: Investment Company
Institute; Employee Benefit Research
Institute (2008 estimate); WSJ
Correction Will Take Time
Home Ownership Rate peaked
in 2005
70%
68%
66%
64%
62%
60%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
A Correction Seemed Likely In
Certain Markets
T OP STAT ES FOR HOME PRI CE APPRECI AT ION (01-06)
140
Percentage %
120
100
80
60
40
20
0
W
as
n
hi
on
t
g
D
C
o
Fl
a
ir d
lif
a
C
ia
n
or
Source: LoanPerformance
H
aw
i
ai
N
da
a
ev
US
A
e
g
ra
e
v
Fed intervention pushes mortgage
rates to all time lows…
Housing Market Beginning to Clear at
Low Levels
200,000
500,000
180,000
450,000
160,000
400,000
140,000
350,000
120,000
300,000
100,000
250,000
80,000
200,000
60,000
150,000
40,000
100,000
20,000
50,000
0
3Q95 3Q96 3Q97 3Q98 3Q99 3Q00 3Q01 3Q02 3Q03 3Q04 3Q05 3Q06 3Q07 3Q08
Non-REO Resales
Source: MDA DataQuick and KBW calculations.
REO Resales
Median CA Home Price
Median CA Home Price ($)
# of CA Home Resales
Third Quarter Home Resales in California
Deleveraging Begins with the
Consumer
* Personal savings as a percentage of disposable personal income. Saving from current income may be near zero or negative when
outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or
other assets, or by using savings from previous periods.
** Monthly data updated through October 2008.
Source: U.S. Department of Commerce: Bureau of Economic Analysis and KBW research.
Long-term rates at historic lows…
State of the Bank Markets
KBW Regional Bank Performance
KBW Regional Bank Index (KRX)
Subprime
cracks
80
70
60
60
50
50
40
Fe
b
A-p07
M r-0
ar 7
-0
7
07
bFe
JaMa
n- r0707
40
07
nJa
Subpri
me
New Century fails
cracks
70
($17B subprime
mortgage originator)
80
Commercial paper
market
disappears
Commercial
paper market
Largest single month
disappears
Investment banks
New Century
Largest
single
decline
for leveraged
freeze fund
Investment
loan market
fails ($17B
month decline
withdrawls
& inject
banks freeze
subprime
for leveraged
Crisis in
capital
fund
mortgage
loan market
confidence
in
withdrawls &
investment
inject capital
bank balance
KBW Regional Index (KRX)
Bank of America
Liquidates $33B
money market fund
7
90
7
90
-0
100
ov
100
N
110
AM
pray
-0-0
77
M
ay
Ju07
n
Ju -07
n07
JuJ
l-u0l707
Au
gAu 07
Se g-0
p- 7
07
OS
cte
-0p707
N
ov
O 07
D ct-0
ec 7
-0
7
110
First SIV Failure - Cheyne
Financial ($8B)
-0
investment bank balance
sheets
D
ec
in confidence
in
KBW Regional Crisis
Bank
Index (KRX)
120
S & P 500
Source: SNL Financial. Data as of 1/8/09. The KBW Regional Banking Index (KRX) is an equal weighted index of 50 geographically diverse companies
representing regional banking institutions listed on U.S. stock markets.
KBW Regional Bank Performance
(continued)
C buys WB with
government
assistance
9/29/08
KBW Regional Bank Index (KRX) 2008 & 2009 YTD
Government plans
Short selling suspendedon buying $700B in
banks' mortgage
for 799 financials
debt
9/18/08
9/19/08
KBW Regional Bank Index (KRX)
AIG bail out by
government
9/17/08
100
Bear Stearns Fails
3/14/08
50
9/25/08
40
o0v7
-0
8
Crisis in
confidence in
investment
bank balance
ov
NN
O O
ct ct
-0 -0
7 8
07
8
KBW Regional Index (KRX)
p-
Se07
Se p-0
08
Au
g-
7
Ju Juln- 08
07
JuA
l-u0g
7-
ay
-0
un7
-0
8
M
-0
8
M
ar
08
bFe
Ja
n-
08
40
COF buys Chevy
Chase Bank
12/3/08
09
60
Ap
rJ-0
50
Bank of America buys
Countrywide Financial
for 31% of book value
1/10/08
Ja
nA0p7
Fe r-08
b07
M
M
ar ay
-0 - 0
7 8
60
paper market
IndyMac Fails 11 Bank Failures in '08;
disappears
FDIC's "Problem List"
7/11/08
New Century
Largest singlegrows to 117
Investment
fails ($17B
month decline 8/27/08
banks freeze
subprime
for leveraged
fund
Fannie/Freddie capital loan market
mortgage
WFC / WB &
merger
concerns
withdrawls
WM bought out
by
approved by FED
7/8/08
JPM inject capital
10/12/08
n-
70
Fannie/Freddie bail out by
government
Commercial
9/8/08
Ja
70
Subpri
me
cracks
8
80
80
-0
90
ec
90
07
100
Deflation in America
rumored
11/21/08
Citigroup receives 2nd
government bailout
11/24/08
GS, MS, JPM, & other
banks sell govt. backed
notes
Week of 11/24/08
WFC acquires WB
for $7 per share
without
government
assistance
10/3/08
Lehman Bros. files for
Chapter 11. BAC
acquires MER for $47B
9/15/08
D
110
More write-downs / capital
raises for I-banks
June 2008
ec
-
110
D
Leveraged loan market
legs down
March 2008
Treasury designates
$250B for senior
PNC buys NCC for
preferred equity in
$2.23 per share
large banks
10/24/08
10/14/08
Dow down 21% in
Oil hits 3 year low below
last 7 trading days
$50 a barrel
10/9/08
11/20/08
Enemployment rises to
7.2%. The highest it has
been in 16 years
1/9/08
Since Sept. 1, 19
financial companies have
become bank holding
companies, including GS,
MS, AXP
12/17/08
Number of problem
banks and thrifts
jumps to 171
11/25/08
S & P 500
Source: SNL Financial. Data as of 1/8/09. The KBW Regional Banking Index (KRX) is an equal weighted index of 50 geographically diverse companies
representing regional banking institutions listed on U.S. stock markets. Note: This graph is a continuation of the graph on the previous page.
Capitalism in crisis
Phase I – The Sub-Prime Crisis
April 2007 –
New Century, largest U.S. sub-prime lender, files for bankruptcy
July 2007 –
Bear Stearns closes 2 hedge funds after banks refuse bail out, Bernanke
warns crisis could cost up to $100 billion
August 9, 2007 –
Interbank lending market seizes up
September 18, 2007 –
Fed cuts funds rate by 50 bp to 4.75% beginning easing cycle
Jan 11, 2008 –
Bank of America acquires Countrywide Financial for $4 billion
Phase II – The Liquidity Crisis
March 16, 2008 –
Bear Stearns acquired by J.P. Morgan for $2 per share
July 13, 2008 –
Federal regulators seize IndyMac
September 7, 2008 –
Government takes over Fannie Mae & Freddie Mac
Capitalism in crisis
Phase 3 – The Solvency Crisis
September 15, 2008 –
Lehman Brothers files for bankruptcy, Bank of America acquires Merrill
Lynch for $50 billion
September 16, 2008 –
Fed announces $85 billion rescue package for AIG
September 18, 2008 –
Reserve primary fund “breaks the buck” triggering exodus from money
market funds
September 19, 2008 –
Bush announces plan to buy troubled assets from financial firms,
Treasury guarantees money market funds
September 22, 2008 –
Goldman Sachs & Morgan Stanley convert into bank holding companies
September 25, 2008 –
Federal regulators seize WaMu and sell it to J.P. Morgan for $1.9 billion
September 30, 2008 –
FDIC increases deposit insurance to $250,000
October 3, 2008 -
House approves revised $700 billion economic rescue package by vote
263-171 and President Bush signs into law, Wachovia snubs Citigroup and
agrees to be purchased by Wells Fargo for $15.1 billion
Capitalism in crisis
October 13, 2008 -
Treasury launches Capital Purchase Program making mandatory investments
of $125 billion in 9 banks
October 14, 2008 -
FDIC extends unlimited deposit insurance to non-interest bearing deposit
accounts
October 24, 2008 -
PNC acquires Nat City for $5.2 billion using TARP funds
November 12, 2008 –
Treasury abandons plan to buy up bad debt and instead says it will use
remainder to help revive consumer lending
November 24, 2008 –
Citigroup receives an additional $20 billion capital investment and $306
billion loan guarantee from government
November 25, 2008 -
Fed announces plans to buy $600 billion of agency debt and mortgagebacked bonds and establishes $200 billion program to support consumer and
small-business loans
December 12, 2008 –
Senate rejects House-approved bailout plan for GM & Chrysler
December 16, 2008 -
Fed cuts fed funds rate 75 bp to “target range” of 0 - .25%
December 19, 2008 -
Treasury agrees to extend $13.4 billion in emergency loans to GM & Chrysler
Capitalism in crisis
January 8 , 2009 -
U.S. employers cut 524,000 jobs in December, capping the worst year of job
losses since 1945
January 12, 2009 -
President-elect Obama asks President Bush to request second $350 billion
installment of TARP funding
January 15, 2009
Bank of America requests additional $20 billion
State of the Bank Markets
Bank portfolios transitioned to higher risk, real estate heavy assets
—
—
Higher fees and search for asset growth fueled C&D lending
Real estate represented over 50% of bank portfolios in 2007
Loan Composition, FDIC-Insured Commercial Banks
100%
100%
Other
Leases
Other Consumer
90%
80%
90%
80%
Credit Card
70%
70%
Commercial
60%
60%
Construction
50%
Commercial Real Estate
40%
30%
~25% of
portfolios
50%
40%
30%
Home Equity
20%
20%
Residential Mortgage
10%
10%
Note: Period ending balance is used to calculate loan
composition
Source: SNL DataSource, FDIC, and KBW Research
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
0%
1985
0%
Over 50%
of
portfolios
How did we get here?

The “securitization” of banking

Accommodative monetary policy

Mark to market accounting

Relaxed capital requirements

Affordable housing targets

Financial innovation (e.g., option ARM)

Over reliance of past performance as predictor of the
future
Competition Among Banks Drove
Behavior

— Competition among lenders caused spreads to narrow
substantially
— Competition for deposits created increased borrowing costs
and dependence on wholesale deposit sources
— De novo banks formed at unprecedented pace heightened
Net Interest Margin (%)
competitive dynamics
5.00
4.75
4.50
4.25
Net interest margins fell steadily from 1995 – 2008YTD

Financial Institutions are not being paid for the risk
4.00
3.75
3.50
3.25
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 '08 Q2 '08 Q3 '08
5B-$30B in Assets
All Banks and Thrifts
Source: SNL Financial. Data as of 9/30/08. Note: Metric is the median of the top tier consolidated banks and thrifts with assets greater than $500 million.
Bank Loan Portfolios are
Undergoing Significant Distress

NPAs have spiked over the last several quarters,
increasing from $39B in December of 2006 to over
$150B currently (9/30/08)
1.10
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
NPAs / Assets (%)
5B-$30B in Assets
All Banks and Thrifts
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Q1
'08
Q2
'08
Q3
'08
Source: SNL Financial. Data as of 9/30/08. Metric displayed is the median. Note: Analysis includes top tier consolidated banks and thrifts with assets greater than
$500 million. NPAs include nonperforming loans and leases, renegotiated loans and leases, and real estate owned.
Magnitude of Nonperforming
Loans

Non-accrual loans for nationwide banks and thrifts with greater than
$500 million in assets, excluding 1-4 Family Loans:
9/30/08
6/30/06
Foreign RE
Loans
Commercial RE
2%
14%
Agricultural
Loans
Multi-family
1%
2%
Commercial RE
18%
Foreign RE
Loans
9%
Commercial
45%
Construction
7%
Consumer & HE
15%
$13.4 billion
Source: SNL Financial. Data as of 9/30/08.
Multi-Family
4%
Agricultural Loans
0%
Construction
50%
Commercial
17%
Consumer & HE
13%
$65.4 billion
Credit write-downs reach $1
trilllion…
$1,200
180,000
Cumul Writedowns (left axis)
160,000
Cumul Capital Raised (left axis)
$1,000
140,000
$800
120,000
100,000
$600
80,000
$400
60,000
40,000
$200
20,000
$0
Cumulative job losses
Cumulative writedowns & capital raised ($billions)
Cumul Job Losses (right axis)
Wachovia
Citigroup
AIG
Freddie Mac
Fannie Mae
Merrill Lynch
UBS
Washington Mutual
HSBC
Bank of America
National City
J.P. Morgan
Wells Fargo
Morgan Stanley
RBS
Lehman Brothers
Writedowns
($bn)
$96.50
$65.70
$60.90
$58.40
$56.00
$55.90
$48.60
$45.60
$33.10
$27.40
$26.20
$20.50
$17.70
$15.70
$15.10
$13.80
Capital
Raised
($bn)
$11.00
$74.00
$64.90
$7.00
$15.60
$29.90
$30.60
$12.10
$4.90
$55.70
$8.90
$44.70
$41.80
$24.60
$48.30
$13.90
0
Prior
Q3
Q4
Q1
Q2
Q3
Q4
2007 2007 2008 2008 2008 2008
* cumulative losses through November 16,2008
Job
Cuts
8,393
23,660
980
5,720
9,000
4,200
2,780
11,150
4,900
4,100
500
9,178
10,200
13,390
Historical Bank Offering Activity
Levels
Over $151 billion if
capital from Sovereign
Wealth Funds included
Only $44.3B Raised
in the Previous
Decade
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
$85,971
60
50
40
30
20
$2,956
$937
$4,714
$1,774
$6,766
$4,653
$6,311
$5,136
10
$7,102
0
1999
Year
# of Deals
Number of Deals
Millions ($)
Deal Value ($mm)
1999
2000
2001
2002
2003
2000
2001
Deal Value2003
($mm)
2002
2004
2004
2005
#2005
of Deals
2006
2006
2007
2007
2008
2008
IPO
14
6
1
5
5
9
9
5
2
0
$100,000
$85,971
$213.8
$234.8
$6.0
$124.9
$421.4
$558.6
$385.0
$190.7
$77.6
$0.0
$90,000
$80,000
Source: Dealogic. Note: US and Puerto Rican bank IPO, follow-on, 144A, PIPE and Convertible offerings since 1998. As of January 9, 2009.
60
50
Balance Sheets are Not Positioned
to Cover Losses
 Accounting dictates, lax credit underwriting standards and overly optimistic reserve
levels have caused under reserved balance sheets for most U.S banks, necessitating
significant adjustments
Reserves / NPAs (%)
300.00
250.00
200.00
150.00
100.00
50.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
All Banks and Thrifts
5B-$30B in Assets
Q1
'08
Q2
'08
Q3
'08
Reserves / Loans (%)
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
5B-$30B in Assets
2000
2001
2002
2003
2004
2005
2006
All Banks and Thrifts
Source: SNL Financial. Data as of 9/30/08. Metric displayed is the median.
Note: Analysis includes top tier consolidated banks and thrifts with assets greater than $500 million.
2007 Q1 '08 Q2 '08 Q3 '08
Nationwide Bank & Thrift Failures
 Bank and thrift failures remain well below those levels seen in the early 1990s,
though they are on the rise, with year-to-date failures already exceeding all of
2007.
Bank & Thrift Failures since 1990
280
480
# of Failures
224
168
112
Count
5
5
2
2
2
2
1
1
1
1
1
1
1
25
360
240
120
56
0
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Aggregate Assets ($B)
Source: FDIC. 1/12/09.
Number of Failures
Aggregate Assets ($B)
2008
CA
GA
NV
FL
MO
TX
WA
AR
KS
WV
MI
MN
IL
Total
Searching for a Second Derivative
on Credit
Delinquency Data
Subprime*
Home Equity***
Option ARMs**
Prime****
3.00%
40.00%
2.75%
35.00%
2.50%
2.25%
30.00%
2.00%
25.00%
1.75%
1.50%
20.00%
1.25%
15.00%
1.00%
10.00%
0.75%
0.50%
5.00%
0.25%
0.00%
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
0.00%
* Total subprime delinquencies as represented by ABX.
** Downey Financial NPAs, excludes total debt restructured.
*** Washington Mutual: nonaccrual prime home equity loans as a percent of WM's prime home equity held for investment loan portfolio; data
represents quarter (e.g., Mar-07 = 1Q07).
**** Freddie Mac single-family delinquencies.
.
Source: ABX Net, company reports, and KBW calculations
What is next?
•Home equity loans
•Credit card loans
•Automotive loans
•Corporate bonds
•Leverage financing
•Commercial real estate financing
Home Equity Delinquencies and Net
Charge-offs at Banks (in $ billions)
Based on Data filed with Bank regulators. Home equity loans and lines = revolving lines of credit
secured by one- to four-family properties + junior lien loans secured by one- to four-family
properties. Delinquent home equity = Home equity loans and lines that are more than 30 days past
due or non accruing
Source: SNL Financial
Credit spreads hover near record
highs…
5 yr Industrial Corporate Bond Spreads over LIBOR
But credit conditions remain
tight…
Federal Reserve Senior Loan Officer Survey
(% tightened standards or increased pricing)
100%
98%
80%
84%
Tighter Standards
Higher Pricing over COF
60%
40%
20%
0%
-20%
-40%
-60%
-80%
Jul-08
Mar-08
Nov-07
Jul-07
Mar-07
Nov-06
Jul-06
Mar-06
Nov-05
Jul-05
Mar-05
Nov-04
Jul-04
Mar-04
Nov-03
-100%
Bank lending has increased…
Significant refinance on
syndicated deals
Value of U.S. corporate debt
maturing in 2009, in billions
Source: Standard & Poor’s
Deal flow down
significantly
Syndicated-Loan Market / Global Borrowing via Syndicated Loans
Source: Reuters Loan Pricing Corp
What Does This Mean For
You?
Important Underwriting
Metrics
 Relationships and track record
 Liquidity of loan - What is the repayment?
 Efficiency of capital employed
 Balance sheet strength
 Collateral coverage
 Backlog analysis
 Market expectations
Underwrite your bank
 Has it applied for TARP?
 Has it opted out of transaction account guarantee program?
 What is its portfolio exposure to real estate, charge card,
home equity, Auto, etc.
 Does your banker understand your WIP?
 What is the credit approval process - do they know you?
 What is the market saying?
Tougher Credit Environment
 The credit markets have tightened
—
—
—
—
—
—
—
—
Higher interest rates and fees
More and tighter covenants
Shorter maturities
Lower total and senior debt multiples
Increased focus on balance sheet strength
Difficult syndication market
100% financing less readily available
Automakers and other lenders shying away from
leasing due to depressed residual values
Relationships are Key
 Relationships continue to drive loan markets
—
—
—
Unfunded credit facilities exert significant pressure on
lenders’ overall relationship returns
Banks have demonstrated a willingness to commit to
credits with returns below their hurdle if prospects for
retaining and/or gaining ancillary business are visible
Returns on new deals being weighted against buying
discounted paper in the secondary market
 Middle market (EBITDA < $50 million), non-levered (<3.0x Total
Debt/EBITDA) transactions continue to get done
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Well structured, well priced transactions
Solid borrower track record
Sensible use of funds
Support from relationship lenders
Debt Market Observations
Lenders are once again underwriting new transactions
based on traditional credit standards
What’s In
What’s Out
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Underwritten financings designed
for syndication to CLO funds
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High leverage
Cheap Pricing
Commodity Lending
Quick and narrow marketing
Token diligence
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Big LBOs
Dividend recaps / refinancings
“Story deals”
Covenant-lite 2nd lien junior debt
Low / modest flex provisions
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Club deals
Prudent leverage
Wider spreads
Relationship lending
Longer and broader marketing
process
Smaller “middle market” deals
Limited dividend recaps; growth
financings / acquisitions
“Clean” deals
Non-cyclical credits
Traditional covenants
Full flex provisions (pricing,
structure)
The Big Question: Recession or
Depression?
Recession
Depression
- A contraction phase of the
business cycle, or "a period of
reduced economic activity."
- An extended period of chronically
weak economic performance and
financial instability
- "a significant decline in economic
activity spread across the
economy, lasting more than a few
months, normally visible in real
GDP growth, real personal income,
employment, industrial
production, and wholesale-retail
sales”*
- Characterized by abnormal
increases in unemployment,
restriction of credit, shrinking
output and investment, numerous
bankruptcies, reduced amounts of
trade and commerce, as well as
highly volatile relative currency
value fluctuations, mostly
devaluations.
- Rule of thumb: Two quarters of
negative GDP growth
- Rule of thumb: 10% decline in GDP
Question & Answer