View
221
Download
0
Category
Tags:
Preview:
Citation preview
S
Great Recession
History
Great Depression
Further Regulation
No Speculating
1980’s
Explosion of Financial Services Industry
Banks went public
WS became rich
Regan appoints Treasury Secretary
1980 – Early 2000’s
Period of Deregulation
Particularly in Savings & Loans
Allows speculation with deposits
Charles Keating
American Continental Corporation
Bought Lincoln Savings and Loan
Assets = 1.1Billion – 5.5 Billion (In four years)
Against regulation
Keating 5
Partnered with Alan Greenspan
1990’s
Too big to fail..
Citicorp and Travelers Merger
Too big to fail = Government Bailout
Oil Tanker
Dot-Com Bubble
End of 1990’s
5 Trillion in Losses
IBanks promoted companies they knew would fail (Recurring theme…)
Infospace
Infospace
Deregulation
Led to illegal activity from banks
Freddie Mac
Accounting Fraud
Fined $125 Million
Fannie Mae
Accounting Fraud
Overstated earnings by $10Billion
Fined $400Million
CEO receives $52 Million in bonuses that year
UBS
Helped wealthy Americans evade taxes
Fined $780 Million
Deregulation = Derivatives
1990’s deregulation led to boom in derivatives
Could gamble on anything
Derivatives market = $50 Trillion in late 1990’s
All unregulated
Greenspan + Summers wanted to keep derivatives unregulated
Derivatives Market Chart
Leverage and Leverage Ratio
Loans then
Typically the loan involved only two parties
Small bank and individual
Mortgage payments given directly to bank
Bank held mortgage until maturity
Self-fulfilling regulation
Loans Now
Growth in Lending
Growth in Subprime Lending
CDO
Collateralized Debt Obligation
Similar to MBS, just other structured debt
Sold to investors
Offsets risk
Exploded before crisis
CDO Issuance
CDS
Transfers credit exposure
From one party to next
Buyer makes payments to seller
Default gives buyer premium and IR to maturity
CDO Goldman Sachs
Goldman purchases CDS
Bets against own CDOs
$22Billion in CDS from AIG
More customers lost, more Goldman gains
Growth in CDS
Growth in MBS
Rating Agencies
Biggest rating agencies were Fitch, S&P, and Moody’s
They made money off of rating credit
The more AAA ratings they gave, the more $$
Toxic loans received AAA
Lehman rating
Court response
Revenue of Big 3
Ratings Downgrades
Consumer Credit
Home Prices
WS Exorbitance
Became “pissing contest, who’s was bigger?”
Lehman owned 6 jets (One a 767)
Escorts
Wall Street Bonuses
Delinquency Rates
Foreclosures and CDO collapse
Who fell?
Bear Sterns
Fannie & Freddie (Rated AAA day before takeover)
Lehman
Meryl Lynch
US Failed Banks
Commercial Papers Collapse
Thank you!
Recommended