Econ110BW11 - Lec 25 A - GRol

Econ110BW11 - Lec 25 A - GRol - Macroeconomics B Econ 110B,...

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Macroeconomics B Econ 110B, Winter 2011 Prof. Giacomo Rondina Lecture 25
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Announcements Reminder: CAPE online evaluations. Review Session ahead of Final Exam Saturday, March 12 th , 10:00am to 11:50am, Center Hall 113 2 Depressions and Slumps (Ch. 22)
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Depressions and Slumps: the Great Recession (2008 2010?) 3 Depressions and Slumps (Ch. 22)
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Depressions and Slumps: the Great Recession (2008 2010?) 4 Depressions and Slumps (Ch. 22)
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Depressions and Slumps: the Great Recession (2008 2010?) What triggered the recession? What made it so deep and long lasting (unemployment)? How did economic policy react? 5 Depressions and Slumps (Ch. 22)
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The Financial Crisis of 2007 2009 anks om ld ew anking Banks: from Old to New Banking Housing Prices 6 The Great Recession (2008 2010)
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Why do Banks exist? John would like to take a loan to buy a car. Mary would like to save part of her paycheck and earnareturnonit. BANK “Northern Rock” o hn nd ary eed ank? Do John and Mary need a bank? Mary would like to take back her money at any time John would like to repay the loan over several years. What is it that the bank is supposed to do? Ensure that there is always a Mary willing to deposit . Maturity Match 7 Ensure that John is able to repay the loan back. Risk Match The Great Recession (2008 2010)
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The “Old” Banking John would like to take a an uy r Mary would like to save art f er aycheck d BANK th Rk loan to buy a car. part of her paycheck and earnareturnonit. “Northern Rock” Northern Rock Balance Sheet Assets Liabilities an hn ary’s eposit Risk Match Maturity Match Loan to John $1,000 Mary s Deposit $1,000 Car as Collateral, Income ouses s ollateral eposits Many different “Mary’s” any ifferent epositors Mortgages Houses as Collateral Income Deposits Many different depositors 8 The Great Recession (2008 2010)
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Towards “New” Banking: Securitization ssets abilities Northern Rock Balance Sheet Risk Match Maturity Match Assets Liabilities Loans and ortgages Deposits Houses as Collaterals come Mortgages Income 9 The Great Recession (2008 2010)
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Towards “New” Banking: Securitization ssets abilities Northern Rock Balance Sheet Risk Match Maturity Match Assets Liabilities Loans and ortgages Deposits Houses as Collaterals come Mortgages Income Financial Markets Bear Sterns Lehman Brothers JP Morgan oldman chs 10 Goldman Sachs The Great Recession (2008 2010)
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Towards “New” Banking: Securitization ssets abilities Northern Rock Balance Sheet Risk Match Maturity Match Assets Liabilities Loans and ortgages Deposits Houses as Collaterals come Mortgages Income Assets Backed by Houses as Financial Markets Collaterals (MBS, CDO) Bear Sterns Lehman Brothers JP Morgan oldman chs 11 The Great Recession (2008 2010) Goldman Sachs
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Towards “New” Banking: Securitization ssets abilities Northern Rock Balance Sheet Risk Match Maturity Match Assets Liabilities Loans and ortgages Deposits Houses as Collaterals come Mortgages Income Assets Backed by Houses as Financial Markets Collaterals (MBS, CDO)
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This note was uploaded on 01/18/2012 for the course ECON 101 taught by Professor Bansak during the Summer '07 term at San Diego State.

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Econ110BW11 - Lec 25 A - GRol - Macroeconomics B Econ 110B,...

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