Presented ByChanchal Kumar 50803005Nisheeth Srivastava 50803023

Lehman Brothers BANKRUPT. Merrill Lynch acquired by Bank of America for $50

billion. Bear Stearns acquired by JP Morgan Chase for

$1.2 billion AIG helped by government by borrowing it’s

assets.

French bank BNP Paribas suspended three investment funds worth €2 billion .

The European Central Bank (ECB) pumped €95 billion into the European banking market .

The Dutch bank NIBC announced losses of €137 million from asset-backed securities in the first half of this year.

ICICI too facing heat in India.

C = Consumables , I = gross investmentG= Government spendingX= Export , M= Import

1. Growing Market Economy

2. Declining Market Economy

The bursting bubble was called :

SUB-PRIME CRISIS

Sub-prime home loans Sub-prime rate Sub-prime mortgage

Big American Dream by Mr. Bill Clinton

House to all Americans. Emergence of robust and good credit rating financial institutions

Risk willingness Authorities to financial institution apart from banking sector.

Good or bad customers Customers rated by FICO (Fair Isaac Corp.) Score = 620 Mortgage within 12 months

Emergence of financial institutions for development of low income group.

They took loans from banks Having good credit rating Division of loans into smaller portions Used to give them out as home loans. But higher interest rates charged.

Borrower below prime candidature. Bad customer Past payment Credit history Income level Employment status

Sub-Prime Rate : Lending home loans at higher rate of interest.

Sub-Prime Home Loan Market : the home loan and the market it created.

Between 1997 and 2006 , American home price increased by 124%

Houses were started treated as investments like stock

Financial s sector downturn. Mortgage of companies Shutdown Merger deals Market weakness Indirect economic effect

Job losses GDP slow down Inflation rise Stock indices worldwide trended downturn Liquidity risk About 85 % decline in profit of US banks Operation suspended

IMPACT OF CRISIS