Ethics Presentation

Sub-Prime Mortgage Crisis

By: Sulaiman Alshihab, Silje Landmark, Eduardo Mercado, Alexander Sereno, Joseph Torres

Subprime Mortgage Crisis

Banks Create New Market

Credit Default Swaps (CDS) & Collaterized Debt Obligations (CDO)

A Foreseen CrisisGovernment Attempts to Regulate CDS/CDO’s

Issue of Transparency

Lobbying & Bank’s Defense

Outcome

Mortgage Originators saw Opportunity

Countrywide & Quick Loan Funding + Investors

Target: Subprime-Borrowers

Why?

How?

Lax Screening Process, Adjustment Rate Loans, Low

Teaser Rates

Mortgage Lenders Exploited the Public

How Homeowners Contributed to Housing Crisis

Homeownership was seen as a safe investment

Many homeowners believed if they sold their home, they would be able to make money

Home Homeowners Contributed to Housing Crisis (cont.)

Homeowners purchased houses they could not afford

Many lost their jobs and homes

Video:

https://m.youtube.com/watch?v=pfeZXJ_N-gs

Banking Fraud

Due Diligence & Underwrite Fraud

Analyst & Rating Agency Fraud

Housing Bubble Burst Loan to not credit-worty

individuals

Interest-only loans

Synthetic CDOs

Goldman Sachs

Focus on money not clients

AftermathGovernment attempts to bring justice for the people

The People & Gov’t go after Bank CEO’s & Higher-ups

Is the Justice Department successful?

Conclusion

No Executives are convicted

Post-depression Era safety measure never reinstated

Work Cited Meng, Lei, and Owain Ap Gwilym. "The Characteristics and Evolution of Credit Default Swap Trading." Journal of Derivatives &

Hedge Funds 13.3 (2007): 186. ProQuest. Web. 3 Dec. 2015.

Holt, Jeff. (2009). A summary of the primary causes of the housing bubble and the resulting credit crisis: A non-technical paper. The Journal of Business Inquiry 8(1): 120-129.

Ivry, Bob. "Making Money on Bad Bets; Daniel Sadek's Quick Loan Funding was One of those at the Vanguard of Firms Reaping High Fees Providing Mortgages for High-Risk Creditors. 'if the Loans were so Bad, Why did Wall Street Keep Buying them?' He Asks. Bob Ivry Reports." The Ottawa Citizen: C3. Dec 27 2007. ProQuest. Web. 4 Dec. 2015 .

Amadeo,Kimberly. “2007 Financial Crisis: Explanation, Causes, Timeline.” US Economy Expert 

Dean Baker, enter for Economic and Policy Research, “The Housing Bubble and the Financial Crisis”, real-world economics review, issue no. 46, 20 May 2008, pp. 73-81Amadeo, Kimberly, “CDOs (Collateralized Debt Obligations)” US Economy Expert

"JP Morgan." Foreign Policy, (2002): S16.

Dokko, Jane, Brian M Doyle, Michael T Kiley, Jinill Kim, Shane Sherlund, Jae Sim, and Skander Van Den Heuvel. "Monetary Policy and the Global Housing Bubble." Economic Policy, 26.66 (2011): 233-283. 

“Money, Power, Wall Street-Part 1” (Rise of Structured Finance Deriviatives to Transfer Risk) http://video.pbs.org/video/2226666502/

 60 Minutes special “House of Cards” https://www.youtube.com/watch?v=rLvn_4-f9h8

“House of Cards” CNBC special report on Predatory Lending http://www.hulu.com/watch/59026

You tube excerpts from CNBC: Hedge fund mgr. Kyle Bass foresees lack of due diligence : https://www.youtube.com/watch?v=UE67Q3ixXEc