简单实用授课 模板：次贷危 机Subprime crisis.pptVIP

Alok Sheel India : Growth story Benign External Environment 2007 – The silent storm Meanwhile, a silent storm brewed in international financial markets with origins in the US housing market Housing market Mainstay of household demand in OECD countries including US Unprecedented boom since 2001 Fed on excess liquidity generated by global imbalances and financial innovation Real interest rates in US were negative High levels of leverage The boom was led by rising housing prices, low interest rates and exacerbated by financial innovation Feeding the Housing Boom Graph Financial Innovation Housing loans offered at back loaded teaser interest rates Assuming that borrowers could refinance the sub prime loans through gains in home equity But loan originating banks were smart……………………………….. What did the banks do? Offloaded the sub prime loans from their balance sheet through Instruments like Collateralized Debt Obligations Modus Operandi of banks (loan originators) Pool together mortgages, including sub prime loans, into CDOS Get top notch credit ratings for senior tranches Retain the highly rated senior derivatives through SIVS Repackage the lower rated derivatives to transform them into synthetic CDOs Investors : Hedge funds, money market and pension funds High Risk High Return in a low interest rate environment Was the mantra which drove these investments How did the investors buy? Hedge/money market/equity funds Accessed short term funds through ‘carry trade’ Pension and insurance funds invested because of top notch ratings Investment funds and investment banks invested their own funds through high leverage by recycling capital several times over on a thin capital base Sharp rise in derivatives CDO and CDS issuance CDO Derivatives Industry 2004 - $25 billion 2002 - $ 103 trillion (3 X Global GDP) 2007 - $186 billion 2007 - $ 450 trillion (9 X Global GDP) The boom