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The Credit Cruncher
A presentation by
Michael Eury
“The economy will never stop growing.........”
Anyone can buy a house
Subprime mortgages =
greater risk of defaulta history of bad loans or defaults,
those with a recorded bankruptcy,
or limited debt experience
Sub-prime mortgageSub-prime
mortgage
Sub-prime mortgage
Sub-prime mortgage
Sub-prime mortgage
Bankers named these “Collateralised Debt
Obligations!”
Note: Earlier name, “Worthless Junk”, was less popular with investors
A A A
rigorous analysis by ratings agencies
US investment banks are
prime movers in these
transactions
(‘possibly’ not a real banker)
Banks, governments,
businesses around the world bought these ‘rock solid’
assets
And on it went.......
Debts assets
Debt assets
Debt
Until one day, when........
Honeymoon periods on sub-prime interest rates ended
Mortgage holders couldn’t pay the
higher interest rate
...instead of house $ outweighing the mortgage....
...mortgage $ are greater than a house’s worth!
for the unknowing buyers of the Junk assets....
values and financial returns.....
are washed away
up to 100 US mortgage lenders close down and....
CDO’s (Junk assets) !!
Value
Established investment banks become insolvent with a
great risk of more to come!
Commercial confidence plummets
US Federal reserve launches $700b
‘rescue’ package
Stockmarkets crash
no longer confined to the US
it’s now more like this!
Economists don’t quite know what to
do
(and politicians)
“I’ll count to 10, then everything will be all
right!”
“Whoops, forgot to cross my fingers! I’ll try again. 1, 2, 3.......”
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