Group 7

Financial Crisis in USA

Contents

3Acknowledgments �

4Background �

5Subprime Mortgage Crisis �

5Subprime Mortgage �

6Misrepresentation of loan application data �

7Mortgage-backed Securities �

7Housing Downturn �

8Effects on stock market �

9Effect on world economy �

9The Federal Reserve and the Banking Liquidity Crisis �

9Case Study on Lehman Brothers �

13Solution and action of the US Government �

14Stagflation in the global economy should be the policy of holding elections �

14U.S. Government to Invest in Banks to Boost Confidence �

15U.S. government policies in the subprime mortgage crisis �

18Conclusion �

20Appendices �

21Work Contribution �

�

Acknowledgments

It has been the worst financial crisis since the Great Depression of the 1930s. It contributed to the failure of key business, declines in consumer wealth of trillions of dollars and a significant decline in economic activity.

English:

English: Offering subprime mortgage.

Figure 1

The crisis can be linked back to the deregulation and securitization of real estate mortgages in the United States. Those securities were traded around the world and it is hard to assess its risk. And then the housing bubble which peaked in the United States in 2006, causing those securities loses value and leads to an impact on global market.

In this research, we will first describe subprime mortgage and housing bubble crisis.

Then we will study one of the investment bank failures in this incident. Finally we discuss how the US Government does to help this economic as well as a conclusion to our project.

Background

The Subprime Mortgage Crisis threatens to throw the U.S. economy into a recession.

The reason is that the banks lend money to low credit borrowers to buy flat and once the US economy turns down...