POLITICAL ECONOMY OF GLOBAL BANKING CRISES

MUSTAFA AKAYDINHALİL BÜLBÜL

REASONS OF GLOBAL BANKING CRISIS

• United States housing bubble.• Higher interest rates in adjustable rate

mortgages.• Increase in loan incentives.• Easy credit conditions.• Sub-prime lending.• Predatory lending.• Deregulation.• Over-leveraging.

US Current Account on Trade Deficit

REASONS OF GLOBAL BANKING CRISIS

• United States housing bubble.• Higher interest rates in adjustable rate

mortgages.• Increase in loan incentives.• Easy credit conditions.• Sub-prime lending.• Predatory lending.• Deregulation.• Over-leveraging.

US Subprime Lending Expanded Significantly 2004-2006

REASONS OF GLOBAL BANKING CRISIS

• United States housing bubble.• Higher interest rates in adjustable rate

mortgages.• Increase in loan incentives.• Easy credit conditions.• Sub-prime lending.• Predatory lending.• Deregulation.• Over-leveraging.

Leverage Ratios for Major Investment Banks

COMPARING THE RECENT CRISIS TO THE PAST

• 2008-2009 banking crisis far exceeds from past crises.

• Current banking crisis is much larger than the Great Depression in scale.

• More bank branches in 2008-2009 banking crisis than Great Depression.

COMPARING THE RECENT CRISIS TO THE GREAT DEPRESSION

U.S. Bank Failures, 1970-2009

U.S. Bank Failures, 1930-2009

Assets of Failed Banks and GDP

Assets of Failed Banks and GDP

Assets of Failed Banks and GDP

EFFECTS OF GLOBAL BANKING CRISIS

• Impact in the USA• Unemployment• Poverty• Prices• Private and Public Transfers• Assets and Goods and Services• Effects on Developing Countries

Impact in the USA

Impact in the USA

EFFECTS OF GLOBAL BANKING CRISIS

• Impact in the USA• Unemployment• Poverty• Prices• Private and Public Transfers• Assets and Goods and Services• Effects on Developing Countries

World map of countries by rate of unemployment

EFFECTS OF GLOBAL BANKING CRISIS

• Impact in the USA • Unemployment• Poverty• Prices• Private and Public Transfers• Assets and Goods and Services• Effects on Developing Countries

Impact of global financial crisis on poverty

EFFECTS OF GLOBAL BANKING CRISIS

• Impact in the USA • Unemployment• Poverty• Prices• Private and Public Transfers• Assets and Goods and Services• Effects on Developing Countries

Effects on Developing Countries

SOLUTIONS OF GLOBAL BANKING CRISIS

• Deposit Insurance• Bank Support• Prompt Closure and Payout