初一 记叙文 5905字 81人浏览 ruthlee2009

Datong University

Name of Students 刘红伟 张超 马蓓森

Students Number 18 40 20

Writing Tutor 潘丽霞 Pan Lixia

Programme 工商管理英语 Bbusiness English

Module Title Assignment

Title of Assignment What Caused The Financial Crisis?


This assignment is our own work. We searched the information on the Internet


Date Saturday, October 23th, 2010

Describe the main factors that lie behind the Sub-Prime Crisis.

What Caused The Financial Crisis?

Financial crisis, also known as financial tsunami, refers to the dramatic deterioration of the financial indicators of a certain country or several countries and regions in the world. It can be classified as currency crisis, debt crisis, banking crisis, sub-loan crisis, etc. The feature of the crisis is that people are pessimistic about the economic future because of monetary depreciation occurring throughout the region. The causes for the crisis are complicated with multiple reasons, mainly from three aspects, i.e., the U.S. consumption habits of borrowing, the idea of free economic management, and the economic environment and specific policy instruments.

I think we can sum up the cause of our current economic crisis in one word — GREED. Over the years, mortgage lenders were happy to lend money to people who couldn’t afford their mortgages. But they did it anyway because there was nothing to lose. These lenders were able to charge higher interest rates and make more money on sub-prime loans. If the borrowers default, they simply seized the house and put it back on the market. On top of that, they were able to pass the risk off to mortgage insurer or package these

mortgages as mortgage-backed securities. Easy money! and what went wrong with our financial system? The whole thing was one big scheme. Everything was great when houses were selling like hot cakes and their values go up every month. Lenders made it easier to borrow money, and the higher demand drove up house values. Higher house values means that lenders could lend out even bigger mortgages, and it also gave lenders some protection against foreclosures. All of this translates into more money for the lenders, insurers, and investors. Unfortunately, many borrowers got slammed when their adjustable mortgage finally adjusted. When too many of them couldn’t afford to make their payments, it causes these lenders to suffer from liquidity issue and to sit on more foreclosures than they could sell. Mortgage-backed securities became more risky and worth less causing investment firms like Lehman Brothers to suffer. Moreover, insurers like AIG who insured these bad mortgages also got in trouble.

The scheme worked well, but it reverses course and is now coming back to hurt everyone with a vengeance.

The subprime mortgage crisis is an ongoing financial crisis characterized by contracted liquidity in global credit markets and banking systems triggered by the failure of mortgage companies, investment firms and government sponsored enterprises which had

invested heavily in subprime mortgages. The crisis, which has roots in the closing years of the 20th century but has become more apparent throughout 2007 and 2008, has passed through various stages exposing pervasive weaknesses in the global financial system and regulatory framework.

The crisis began with the bursting of the United States mortgages (ARM), beginning in approximately 2005–2006. For a number of years prior to that, declining lending standards, an increase in loan incentives such as easy initial terms, and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007 in many parts of the U.S., refinancing became more difficult. Defaults and foreclosure activity increased dramatically as easy initial terms expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. Foreclosures accelerated in the United States in late 2006 and triggered a global financial crisis through 2007 and 2008. During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure activity, up 79% from


Major banks and other financial institutions around the world have reported losses of approximately US$435 billion as of 17 July 2008 The liquidity concerns drove central banks around the world to take action to provide funds to member banks to encourage lending to worthy borrowers and to restore faith in the commercial paper markets. The U.S. government also bailed out key financial institutions, assuming significant additional financial commitments.





次级抵押贷款危机是一个持续不断的金融危机的特点是收缩流动性在全球信贷市场和银行系统的故障引发的按揭公司,投资公司和政府资助的企业已投入巨资在次级抵押贷款。危机,已在第二十个世纪的最后几年,但已成为越来越明显的根在2007和2008,已通过不同阶段暴露在全球金融系统中普遍存在的弱点和监管框架。这场危机始于美国的房地产泡沫和高违约率和可调利率抵押贷款破裂(臂),开始在大约2005–2006。在那之前一年多,减少放贷标准,贷款的奖励,如简单的初步条件增加,和长期趋势上升的房屋价格,鼓励借款人承担贷款困难的信念,他们能够迅速在更有利的融资条件。然而,一旦利率开始上升,住房价格开始下降,在2006–2007在美国很多地方,再融资变得更加困难。违约和赎回活动急剧增加,容易最初任期届满,房屋价格没有上升的预期,以及ARM 利率重置更高。赎回加速美国在2006年末和引发全球金融危机的2007和2008。在2007,近1300000的美国房屋丧失抵押品赎回权的活动,从2006到79%。全世界的主要银行和其他金融机构报告了约435000000000美元,在七月2008日17流动性问题使得世界各国央行采取行动,提供资金给会员银行鼓励借款人的贷款价值并在恢复商业票据市场的信心损失。美国政府还保释外出主要金融机构,承担大量的额外的财务承诺。