2008 Financial CrisisGroup members:Sonali LachhaniPriyanka MoreSumeet KirveDishant NagraniManoj Malvi

Initialization of crisis

• Federal reserve chairman lowers interest rate to 1%.

• Banks on Wall St. started taking loan form Federal at 1% other countries like China, Japan, Middle east also gave loans to banks on Wall St.

• Banks started leverages.

When Lehman became Layman

• Lehman Bothers became 4th largest investment bank in the US.

• It became bankrupt as a large part of their loan portfolio comprised of loans for buying real estate.

• Lehman Brothers was a big player in the mortgage-backed securities market.

Effects on India

•$16 Billion outflow from India in 2008•Inflation at 12%•$291 Billion – Indian FX reserves as of 03 Oct. •Indian Oil Corp costs to rise 70% to $45 Billion•Industrial growth plummets to 1.3% in August•Sensex down ~50% in 2008•Sensex up ~50% from 2004

Effects on World

• Stock market tanked• Many banks, mortgage lenders, real estate

investors and hedge funds suffered huge losses

• Credit got tighter• Effects on jobs

Effects on USA• March 2008, acquisition of an investment

bank BEAR STEARNS.• September 2008, Lehman brothers

bankruptcy.• Closing of Washington Mutual.• Provision of loan to AIG by US Federal reserve.• Conversion of investment banks into

commercial banks.

Sep-08 Sep-08

September 7, 2008: Federal takeover of Fannie Mae and

Freddie Mac

September 14, 2008: Merrill Lynch sold to Bank of America amidst fears of a liquidity crisis and Lehman Brothers collapse

September 15, 2008: Lehman Brothers files for

bankruptcy protection

September 16, 2008: Moody's and Standard and

Poor's downgrade ratings on AIG's credit on concerns over

continuing losses to mortgage-backed securities, sending the

company into fears of insol-vency.

September 17, 2008: The US Federal Reserve loans $85 bil-lion to American International

Group (AIG) to avoid bank-ruptcy.

September 19, 2008: Paulson financial rescue plan unveiled after a volatile week in stock

and debt markets.

September 25, 2008: Wash-ington Mutual was seized by

the Federal Deposit Insurance Corporation, and its banking assets were sold to JP Morgan

Chase for $1.9bn.

September 29, 2008: The House rejected bail-out bill,

DJIA down 7%October 3,2008: The House

pass the bail out bill

GLOBAL FINANCE CRISIS- "Red September"

Conclusion