Recession 16Specifically‚ Freund (2009) defines global downturns as years when world real GDP growth is (1) below 2 percent‚ (2) more than 1.5 percentage points below the previous five-year average‚ and (3) at its minimum relative to the previous two years and the following two years. 1975‚ 1982‚ 1991‚ 2001‚ and 2008 Freund (2009) describes the evolution of world trade following four previous global downturns. She finds that the size of the decline in world trade during these episodes is
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the effects of the US sub-prime mortgage crisis on financial risk management practices of banks in developed economies‚ and the impact of the 2007-2009 global financial crisis on financial institutions in Zimbabwe. 5. Discuss bank regulation and the Basel guidelines relating to market and operational risk management. Your discussion should include possible reasons why bank regulation and Basel II failed to prevent bank failures during the global financial crisis. 6. Explore the financial risk management
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secured funding has become expensive and difficult to obtain‚ as lenders worry about their ability to sell collateral in illiquid markets in the event of default. In addition‚ many securitization markets‚ such as the secondary market for private-label mortgage-backed securities‚ remain closed or impaired. Considerable experience in both industrialized and emerging economies has shown that severe financial instability‚ together with the associated declines in asset prices and disruptions in credit markets
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country wanted to encourage homeownership so they “meddled” in the mortgage business. They lowered the barriers to entry that screened people who might not be able to afford home ownership. The US government allowed derivative securities to be created that depended upon a steady stream of new mortgages being written. This vicious circle pushed the price of houses to an unsupportable level. When people were not able to pay their mortgages‚ the banks started to call in their loans‚ which devalued the
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giants. Consider the case of Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). Both were offsprings of federal government. Fannie Mae was started in 1938 as a government agency before it became a publically traded company in 1968. Freddie Mac was started in 1970 to provide competition to Fannie Mae. Till recently‚ they accounted for $ 6 Trillion of mortgage securities. To make the mortgage based securities more attractive‚ both these firms provided
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The Frontline Documentary Meltdown recounts that tragic downfall of Bear Stearns one of America’s prominent Investment Banking Institution. It was a fall that was heard and felt globally and one that caused the Global Economic Crisis in 2008 that threw the country in a severe recession that would take the nation years to recover. The economic downturn affected many lives and many loses were incurred by both in financial institution‚ traders and not to mention individual investors.
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Business Economics: Investment Banking – Credit Default Swaps – Mortgage Backed Securities – Keller Graduate School of Management GM545 – Business Economics The world of investment banking has changed since the recession of 2007-2008. The global impact of unregulated credit lending procedures‚ the Credit Default Swaps market‚ and mortgage-backed securities have crippled the economy and have called for regulations to bring economic stability back to the markets. Prior to the recession
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Securitization is a structured finance process that distributes risk by aggregating assets in a pool ‚often by selling assets to a special purpose entity‚ then issuing new securities backed by the assets and their cash flows. The securities are sold to investors who share the risk and reward from those assets. Securitization is similar to a sale of a profitable business into a separate entity. The previous owner trades the ownership of that unit‚ and all the profit and loss that might come in the
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started in 1938 by President Franklin Roosevelt. He wanted to create a system or a new deal which would benefit people who didn’t have homes. Fannie Mae is the nickname of what is known as the federal National Mortgage Association‚ and Freddie Mac is the nickname for Federal Home Mortgage Corporation. 2. The great depression was the major reason for such a system to be put in place simply because private lenders weren’t investing in the home loans because of the stock market crash. 3
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Bank of America for $1 billion in mortgage fraud against Frannie Mae and Freddie Mac. In 2008‚ United States World Wide economic meltdown resulted from one of many reasons‚ the real estate market. Basically Countrywide financial was giving out mortgage loans from 2007 to 2009 without doing screen checks on whether or not the borrowers could afford them‚ and also making most of them out to employees of Fannie Mae and Freddie Mac. Fannie and Freddie buy mortgage loans from banks‚ package them into
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