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Global Lessons from the Recent Financial Crisis:

Need for Reforms
Jason Khan – 212857264 Yiwen Shen – 212828810 Alexander Grynszpan – 212811618 Xueyan wu - 212828380

INTRODUCTION
Mortgage Backed Securities Lack of Regulations in the Banking System Lack of Regulations in the Credit Rating Agencies

Subprime Mortgages

Financial Crisis of 2007-2009

Lack of Regulations of over-thecounter derivatives

Introduction to the Financial Crisis

Causes of the Financial Crisis

Reforms introduced

International response

Conclusion

Cause: Subprime Mortgage
- Housing prices were on the rise à More difficult for consumers to purchase - Investment banks purchased the mortgages from individual lenders, re-packaged them, and sold them to an even larger quantity of small and large investors - Borrowed money to magnify the outcome à Created collateral debt obligations (CDO) - Mortgages were sometimes given without down payments, or assurance of repayments - When the housing bubble “popped”, investment banks held massive debts without means of paying them à led to declaration of bankruptcy

Introduction to the Financial Crisis

Causes of the Financial Crisis

Reforms introduced

International response

Conclusion

Cause: Mortgage backed securities
- Important players in the Crisis: Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC), or as known as Fanny Mae ad Freddy Mac - Through mortgage backed securities, they increased the number of lenders in the market of mortgages, and in sum reduced the reliance on locally based loan associations - In order to maintain as some of the largest mortgage companies in the country, Fanny Mae and Freddy Mac began accepting individuals that were lacking sufficient proof of repayment of funds - Along with the investment banks, suffered from bankruptcies...

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