Understanding the Current Financial Crisis
2012-05-21 19:27:41 举报
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Current status
current
Current Business Plan
Current Business Plan
Set Hardware current limit based on clutch level
Financial Accounting Process
current
Horizontal Cross Functional Current
Current Business Plan
This flowchart tries to explain the basic points in the current mortgage crisis. The story is probably an old one. People try to get the maximum return on their money. Big returns have big risk. Investors may not have realized this, but the risk was there. The two yellow boxes in the chart above show where regulation failed. Normally a bank wouldn't give a loan to someone who had no income and no assets and such mortgages combined together should not have a high rating. By elevating these toxic mortgages to triple A an enormous amount of wealth was generated. However, this wealth disappeared when their true value was determined. This will all happen again, but in a different way.
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Buy mortgage backed securities
Enough securities
Banks don't worry as risk is passed on
Fed founds rate lowered in 2001
End?
Use old data to make ratings look OK
Mortgage securities true ratings become known
Big money looks for a better return
Too many homes have been built so prices fall
Start
Yes
Fed lowers rates again in 2008 to see what other mischief can be created
Lower requirements for mortgages
Homeowners default on mortgages they couldn't afford
No
Understanding the Current Financial Crisis
RatingsOK?
Everythingfine?
Banks react to the bad securities by not loaning money
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