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    Banks created new markets like credit default swaps and collateralized debt obligations to distribute risk from subprime mortgages, but there was a lack of transparency. Mortgage originators targeted subprime borrowers with adjustable rate loans and low teaser rates. When home prices declined and borrowers lost jobs, many defaulted on loans they could not afford, bursting the housing bubble. The financial crisis that followed led to government attempts to regulate derivatives and bring justice against banks and executives, but ultimately no high-level convictions were made and post-depression era regulations were not reinstated.

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    Banks created new markets like credit default swaps and collateralized debt obligations to distribute risk from subprime mortgages, but there was a lack of transparency. Mortgage originators targeted subprime borrowers with adjustable rate loans and low teaser rates. When home prices declined and borrowers lost jobs, many defaulted on loans they could not afford, bursting the housing bubble. The financial crisis that followed led to government attempts to regulate derivatives and bring justice against banks and executives, but ultimately no high-level convictions were made and post-depression era regulations were not reinstated.

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    43 views12 pages

    Eng 205 Finalpresentation

    Uploaded by

    api-302330245
    Banks created new markets like credit default swaps and collateralized debt obligations to distribute risk from subprime mortgages, but there was a lack of transparency. Mortgage originators targeted subprime borrowers with adjustable rate loans and low teaser rates. When home prices declined and borrowers lost jobs, many defaulted on loans they could not afford, bursting the housing bubble. The financial crisis that followed led to government attempts to regulate derivatives and bring justice against banks and executives, but ultimately no high-level convictions were made and post-depression era regulations were not reinstated.

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    of 12

    Sub-Prime Mortgage

    Crisis
    By: Sulaiman Alshihab, Silje Landmark, Eduardo
    Mercado, Alexander Sereno, Joseph Torres

    Subprime Mortgage Crisis

    Banks Create New Market


    How to resolve risk

    Credit Default Swaps (CDS)

    Sell a loans risk

    Collateralized Debt Obligations (CDOs)

    A Foreseen Crisis
    Government Attempts to Regulate CDS/CDOs

    Issue of Transparency

    Lobbying & Banks Defense

    Outcome

    Mortgage Originators saw


    Opportunity
    Countrywide & Quick Loan Funding + Investors

    Target: Subprime-Borrowers
    Why?
    How?
    Lax Screeing Process, Adjustment Rate Loans, Low
    Teaser Rates

    Mortgage Lenders Exploited the Public

    How Homeowners Contributed


    to Housing Crisis
    Homeownership was
    seen as a safe
    investment as home
    prices were only
    thought to go up

    Many homeowners
    believed if they sold
    their home, they would
    be able to make money

    Home Homeowners Contributed


    to Housing Crisis (cont.)
    Homeowners
    purchased houses
    they could not afford

    Once the housing


    market crashed,
    many lost their jobs
    and lost their homes
    Video:
    https://m.youtube.com/watch?v=pfeZXJ_N-gs

    Banking Fraud
    Due Diligence & Underwrite
    Fraud

    Analyst & Rating Agency Fraud

    Housing Bubble Burst


    Loan to not credit-worty
    individuals

    Interest-only loans

    Synthetic CDOs

    Goldman Sachs

    Focus on money not clients

    Aftermath
    Government attempts to bring
    justice for the people
    The People & Govt go after Bank CEOs &
    Higher-ups

    Is the Justice Department successful?

    Conclusion
    No Executives are convicted

    Post-depression Era safety measure never


    reinstated

    Work Cited

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