Crisis economica

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  • Publicado : 3 de mayo de 2011
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Dra. Diana Bank

Gabriel Hernandez

Economic Crisis:
“Sub-prime Mortgage and Credit Crisis

Introduction

In 2008 we saw an important economic recesion in the United States which went until 2009 and 2010. Also we saw that it rapidly expanded to the rest of the World.

The economy of developed countries like the United States deteriorated at a faster pace than it wasexpected. This began to severely affect the economies that depended on the United States economy, like Mexico’s economy. This suggested that the recession was going to be deep and lasting because it was much likely to the Great Depression in 1929.

According to the National Bureau of Economic Reserch (NBER), the recesion is a significative and generalizad fall in the economy. In general, wecan appreciate it in the evolution of the statistical series of producton, the employment, the real income and other indicators.

What we lived in the past months, was an economical recession that each time was more sharp and deep. For obvious rehaznos this crisis manifestated and afected seriously the financial system. It also lived and prospered under intense and speculative activity and insome cases faudulent.

Crisis of the sub-prime mortgages

The crisis in sub-prime mortgage is a financial crisis that is growing by the financial markets since mid-2007, although its origin dates back some years ago. Mainly, it is considered part of the trigger of 2008 financial crisis and the economic crisis of that year. There is talk of sub-prime mortgages as well as when they began tofashion the "hedge funds ".

The mortgage crisis has resulted in many financial bankruptcies, bank nationalization, constant intervention of the central banks of major developed economies, sharp falls in stock prices and a decline in real global economy, which has resulted in recession some of the most industrialized economies.

High-risk mortgages in theU.S. are known as sub-prime mortgages, which are aspecial type of mortgage used to purchase homes and aimed at customers with lower solvency or liquidity, and therefore with a level of default risk higher than theaverage for other credit. This type was higher than that of personal loans and bank charges were more serious. U.S. banks had a limit to the granting of such loans, imposed by the Federal Reserve.

They arecalled prime mortgages to mortgages that have little risk of not being paid. On a rating scale between 300 and 850 points, prime mortgages are priced between 850 and 620 points the best the lowest. The mortages that have the most risk of not being paid are called subprime mortgages and these are rated among the highest 620 points and 300 points the most risky. Defaults on subprime mortgages rose from 3 to 15percent in one year. Lenders suddenly found a rapid drop in profit income through mortgages. And here is where the problem even worse.

Soon everyone was buying and selling mortgage securities everywhere. Thesub-prime mortgage securities reached a total of 3 billion dollars and primemortgages reached $ 25 billion.

Since the debt could be the result of financial transaction through thepurchase and sale of bonds or securitization of credit, subprime mortgages could be transferred to investment funds or pension plans. Sometimes the investment is made ​​through the so-called "carry trade. " The problem happens when the investor, which can be any financial institution, a bank or an individual, comes to ignoring the real risk involved. In a globalizedeconomy where the financial capital flows rapidly, it changes hands frequently and offers financial products and automated quite sophisticated, means that not all investors know the last operation contract.

The U.S. housing market crisis was mainly due to the difficulty some families had to enter the U.S. subprime mortgage loans, and thus pay some of your previous loans watching the growth of interest...
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