Transcript Working Out

Housing Crisis
of 2008
Gurvinder Sidhu
Formation of Housing Bubble
• Lending decision by financial institutions
• Borrowing decisions by individuals
Causes of Crisis
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Relaxation in lending
Poor creditworthiness of borrowers
Rising EMI due to higher interest costs
Borrowers unable to pay
Failure of Banks and Financial Institutions
Impacts of Subprime
Crisis
• Major banks suffered losses
• Companies went out of business (Lehman Bros)
• Companies were sold (Merrill Lynch acquired by
Bank of America)
• Mortgage lenders get acquired (Countrywide
Financial Corporation acquired by Bank of
America)
• US government nationalizes companies
Timeline
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Subprime mortgage crisis
Collapse of Financial System
Economic Crisis
Job Loss
Low consumer spending
Recession -> Low Economic activities
Very low GDP growth
Poor Prosperity of the countries
Global Impacts
• Investors lost confidence in the stock market
• Consumer spending slowed down due to lack of
cash
• Weakened US economy
• World economy slipped into recession
• Exports worldwide decreased