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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