Chapter 5 Notes

Chapter 5 Notes - Chapter 5 Current Multinational Financial...

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Chapter 5 Current Multinational Financial Challenges: The Credit Crisis of 2007–2009 Questions 5-1. Three Forces. What were the three major forces behind the credit crisis of 2007 and 2008? Although there are a variety of differing opinions, many attribute the causes of the credit crisis to (1) the flow of capital into real estate investment in the post-dotcom era; (2) the deregulation of the U.S. commercial and investment banking systems, allowing commercial banks to become larger and larger participants in riskier business activities that had historically been off-limits to them; and (3) the expansion of sub-prime lending and securitization. 5-2. MBS. What is a mortgage-backed security (MBS)? A derivative security composed of a residential or commercial real estate mortgage. 5-3. SIV. What is a structured investment vehicle (SIV)? A structured investment vehicle (SIV) is an off-balance sheet entity first created by Citigroup in 1988. It was designed to allow a bank to create an investment entity that would invest in
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Chapter 5 Notes - Chapter 5 Current Multinational Financial...

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