Credit Crisis 2007-2008 Credit Crisis 2007-2008
By: Raution JaiswalWillamette University(Atkinson Graduate School of Management)
Eventful 2008Eventful 2008March - Bear Stearns: Sale to
JPMorgan @ $10; $29bn loan from Fed
July - Fannie Mae / Freddie Mac $200bn commitment
September - Lehman Brothers Holdings Files for bankruptcy sold to Barclays
September - Merrill Lynch sold to Bank of America for $50bn.
September - AIG: Treasury provides $85bn
September - Washington Mutual failed and sells branch system to JPMorgan for $1.9bn.
How are financial sector stocks doing?How are financial sector stocks doing?
XLF Financial Sector SPDR ETF
DJIA
Changing LandscapeChanging Landscape
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4
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+
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New bank holding companies
Chain ReactionChain Reaction
Who to blame?Who to blame?
Heroes & VillainsHeroes & Villains
Homeowners
Mortgage Brokers
Commercial & Investment Banks
Securities Underwriters
Credit Rating Agencies
Corporate Investors
Corporate Shareowners
Regulators
Lack of Prudence at All Levels
IssuesIssues
Moral hazardConflicts of InterestRegulationFinancial engineering
Top 8 lessons from the credit crisisTop 8 lessons from the credit crisis
1. Economy is essentially not predictable and understandable
2. Risk needs respect
3. Models have their limits
4. Regulation has its limits too
5. (Il)liquidity is the ultimate killer
6. Monetary policy-single focus is price stability
7. Accounting can change everything
8. The double edged sword of leverage
Top 8 lessons from the credit crisisTop 8 lessons from the credit crisis
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