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Sign of the globaliza9on of nancial markets ted

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Unformatted text preview: l Banks Gov- Sponsored Enterprises or Investment Banks Finance Companies Borrowers Lenders Investment Banks Pension Funds Securi=zers Buyers 19 The Subprime Financial Crisis of 2007 – 2008 •  Housing price bubble forms –  Increased cash flows from expor9ng countries (e.g., China, India, Oil- producing countries) to the United States –  Increased liquidity –  Development of subprime mortgage market fueled housing demand and housing prices –  Refinancing 20 0 1975:Q1 1976:Q3 1978:Q1 1979:Q3 1981:Q1 1982:Q3 1984:Q1 1985:Q3 1987:Q1 1988:Q3 1990:Q1 1991:Q3 1993:Q1 1994:Q3 1996:Q1 1997:Q3 1999:Q1 2000:Q3 2002:Q1 2003:Q3 2005:Q1 2006:Q3 2008:Q1 The Subprime Financial Crisis of 2007 – 2008: Housing Bubble 450 400 350 300 250 200 150 100 50 Housing Price Index Trend based on 1975- 1999 21 Source: US Census Housing Vacancies and Homeownership Historical Table 14 2007 2004 2001 1998 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 70.0 69.0 68.0 67.0 66.0 65.0 64.0 63.0 62.0 61.0 60.0 59.0 1965 The Subprime Financial Crisis of 2007 – 2008: Home Ownership Rate 22 The Subprime Financial...
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