You sure You Understood The 2007-08 FINANCIAL CREDIT CRISIS? It's important you do.

00:11:10
https://www.youtube.com/watch?v=2fEk-vnb9YE

概要

TLDRThe video illustrates how the credit crisis emerged from a web of connections between homeowners and investors, driven by easy credit and risky mortgage practices. Banks borrowed heavily due to low interest rates, leading to excessive leverage and the packaging of risky mortgages into CDOs. As these subprime mortgages began to default, housing prices plummeted, causing widespread financial instability. This crisis was marked by a cycle of defaults that led to the freezing of credit markets, resulting in a domino effect of bankruptcies within the financial system.

収穫

  • 💰 The credit crisis is a global financial issue.
  • 🏠 Homeowners and investors are both impacted by mortgage failures.
  • 📉 Easy credit led to excessive risk-taking by banks.
  • 💳 Subprime mortgages were granted with minimal requirements.
  • 🏦 CDOs are complex investment products that groups mortgages.
  • 📊 Housing prices dropped due to over-supply and defaults.
  • 🛑 There was a domino effect of bankruptcies in the financial system.

タイムライン

  • 00:00:00 - 00:05:00

    The credit crisis is a global financial disaster linking homeowners and investors through mortgages via banks on Wall Street. Investors seeking profitable alternatives to low treasury bill returns create a high demand for mortgages. Banks leverage cheap credit to maximize returns, resulting in a risky environment where they connect these two groups to capitalize on homeowners' payment streams.

  • 00:05:00 - 00:11:10

    As the demand for mortgages grows, lenders begin to offer subprime loans, leading to a housing market bubble. When homeowners default en masse, housing prices crash, leaving lenders and investors holding the bag. This cycle of borrowing, selling, and defaulting creates a financial crisis, leading to widespread bankruptcy and a frozen economy.

マインドマップ

ビデオQ&A

  • What is the credit crisis?

    The credit crisis is a worldwide financial fiasco involving subprime mortgages, collateralized debt obligations, and frozen credit markets.

  • Who is affected by the credit crisis?

    Everyone, including homeowners and investors, is affected by the credit crisis.

  • How did the credit crisis begin?

    It began with low interest rates, leading to increased borrowing and high-risk mortgage lending.

  • What are collateralized debt obligations (CDOs)?

    CDOs are financial products that pool various mortgages into 'slices' with different risk levels for investors.

  • What is a subprime mortgage?

    Subprime mortgages are loans granted to borrowers with lower creditworthiness, often with little to no documentation.

  • What happens when homeowners default on mortgages?

    When homeowners default, houses are foreclosed, leading to a surplus of homes on the market and falling housing prices.

  • What role did Wall Street play in the crisis?

    Wall Street facilitated high-risk investments by connecting homeowners with investors through the sale of mortgages.

  • Why did investors initially buy the risky slices of CDOs?

    Investors were attracted by the safe AAA ratings given to certain slices despite underlying risks.

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  • 00:00:01
    the crisis of credit
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    visualized
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    what is the credit crisis
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    it's a worldwide financial fiasco
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    involving terms you've probably heard
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    like subprime mortgages collateralized
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    debt obligations frozen credit markets
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    and credit default swaps
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    who's affected
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    everyone how did it happen
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    here's how the credit crisis brings two
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    groups of people together homeowners and
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    investors
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    homeowners represent their mortgages and
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    investors represent their money
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    these mortgages represent houses and
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    this money represents large institutions
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    like pension funds insurance companies
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    sovereign funds mutual funds etc these
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    groups are brought together through the
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    financial system a bunch of banks and
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    brokers commonly known as wall street
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    while it may not seem like it these
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    banks on wall street are closely
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    connected to these houses on main street
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    to understand how let's start at the
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    beginning
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    years ago
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    the investors are sitting on their pile
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    of money looking for a good investment
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    to turn into more money
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    traditionally they go to the u.s federal
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    reserve where they buy treasury bills
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    believed to be the safest investment but
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    in the wake of the dot-com bust in
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    september 11th
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    federal reserve chairman alan greenspan
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    lowers interest rates to only one
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    percent to keep the economy strong
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    one percent is a very low return on
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    investment so the investors say no
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    thanks
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    on the flip side this means banks on
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    wall street can borrow from the fed for
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    only one percent
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    add to that general surpluses from japan
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    china and the middle east and there's an
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    abundance of cheap credit this makes
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    borrowing money easy for banks and
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    causes them to go crazy with
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    leverage
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    leverage is borrowing money to amplify
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    the outcome of a
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    deal here's how it works
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    in a normal deal someone with ten
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    thousand dollars buys a box for ten
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    thousand dollars
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    he then sells it to someone else for
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    eleven thousand dollars
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    for a one thousand dollar profit a good
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    deal but using leverage someone with ten
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    thousand dollars
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    would go borrow 990 000 more dollars
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    giving him one million dollars in hand
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    then he goes and buys
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    100 boxes with his 1 million dollars
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    and sells them to someone else for one
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    million one hundred thousand dollars
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    then he pays back his 990 000
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    plus 10 000 in interest
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    and after his initial 10 000 he's left
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    with a 90 000
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    profit versus the other guys 1 000.
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    leverage turns good deals into great
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    deals this is a major way banks make
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    their money
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    so wall street takes out a ton of credit
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    makes great deals and grows tremendously
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    rich
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    and then pays it back
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    the investors see this and want a piece
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    of the action and this gives wall street
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    an idea
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    they can connect the investors to the
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    homeowners
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    through mortgages
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    here's how it works
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    a family wants a house so they save for
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    a down payment and contact a mortgage
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    broker
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    the mortgage broker connects the family
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    to a lender
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    who gives them a mortgage
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    the broker makes a nice commission
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    the family buys a house and becomes
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    homeowners
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    this is great for them because housing
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    prices have been rising practically
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    forever
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    everything works out nicely
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    one day the lender gets a call from an
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    investment banker who wants to buy the
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    mortgage
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    the lender sells it to him for a very
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    nice fee
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    the investment banker then borrows
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    millions of dollars and buys thousands
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    more mortgages and puts them into a nice
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    little box
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    this means that every month he gets the
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    payments from the homeowners of all the
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    mortgages in the box
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    then he sits his banker wizards on it to
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    work their financial magic which is
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    basically cutting it into three slices
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    safe
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    okay
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    and risky they pack the slices back up
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    in the box and call it a collateralized
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    debt obligation or cdo a cdo works like
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    three cascading trays
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    as money comes in the top tray fills
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    first then spills over into the middle
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    and whatever is left into the bottom
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    the money comes from homeowners paying
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    off their mortgages
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    if some owners don't pay and default on
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    their mortgage less money comes in and
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    the bottom tray may not get filled
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    this makes the bottom tray riskier and
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    the top tray safer to compensate for the
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    higher risk the bottom tray receives a
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    higher rate of return while the top
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    receives a lower but still nice return
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    to make the top even safer banks will
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    insure it for a small fee
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    called a credit default swap
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    the banks do all of this work so that
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    credit rating agencies will snap the top
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    slice as a safe
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    aaa rated investment the highest safest
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    rating there is the okay slice is triple
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    b still pretty good and they don't
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    bother to rate the risky slice
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    because of the triple a rating the
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    investment banker can sell the safe
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    slice to the investors who only want
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    safe investments
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    he sells the ok slice to other bankers
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    and the risky slices to hedge funds and
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    other risk takers
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    the investment banker makes millions
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    he then repays his loans
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    finally the investors have found a good
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    investment for their money much better
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    than the one percent treasury bills
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    they're so pleased they want more cdo
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    slices
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    so the investment banker calls up the
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    lender wanting more mortgages
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    the lender calls up the broker for more
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    homeowners
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    but the broker can't find anyone
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    everyone that qualifies for a mortgage
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    already has one
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    but they have an idea
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    when homeowners default on their
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    mortgage the lender gets the house and
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    houses are always increasing in value
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    since they're covered if the homeowner's
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    default lenders can start adding risk to
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    new mortgages
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    not requiring down payments no proof of
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    income no documents at all
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    and that's exactly what they did
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    so instead of lending to responsible
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    homeowners called prime mortgages
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    they started to get some that were well
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    less responsible these are subprime
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    mortgages
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    this is the turning point
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    so just like always the mortgage broker
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    connects the family with a lender and a
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    mortgage making his commission the
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    family buys a big house
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    the lender sells the mortgage to the
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    investment banker
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    who turns it into a cdo
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    and sells slices to the investors and
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    others
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    this actually works out nicely for
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    everyone that makes them all rich
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    no one was worried because as soon as
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    they sold the mortgage to the next guy
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    it was his problem
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    if the homeowners were to default they
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    didn't care they were selling off their
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    risk to the next guy and making millions
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    like playing hot potato with a time bomb
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    not surprisingly the homeowners default
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    on their mortgage which at this moment
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    is owned by the banker this means he
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    forecloses and one of his monthly
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    payments turns into a house
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    no big deal he puts it up for sale
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    but more and more of his monthly
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    payments turn into houses
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    now there are so many houses for sale on
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    the market creating more supply than
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    there is demand and housing prices
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    aren't rising anymore in fact they
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    plummet
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    this creates an interesting problem for
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    homeowners still paying their mortgages
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    as all the houses in their neighborhood
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    go up for sale the value of their house
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    goes down and they start to wonder why
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    they're paying back their 300 dollar
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    mortgage when the house is now worth
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    only ninety thousand dollars
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    they decide that it doesn't make sense
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    to continue paying even though they can
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    afford to and they walk away from their
  • 00:09:18
    house default rates sweep the country
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    and prices plummet
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    now the investment banker is basically
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    holding a box full of worthless houses
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    he calls up his buddy the investor to
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    sell his cdo but the investor isn't
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    stupid and says no thanks he knows that
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    the stream of money isn't even a dribble
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    anymore the banker tries to sell to
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    everyone but nobody wants to buy his
  • 00:09:43
    bomb
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    he's freaking out because he borrowed
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    millions sometimes billions of dollars
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    to buy this bomb and he can't pay it
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    back
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    whatever he tries he can't get rid of it
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    but he's not the only one
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    the investors have already bought
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    thousands of these bombs
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    the lender calls up trying to sell his
  • 00:10:06
    mortgage but the banker won't buy it and
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    the broker is out of work
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    the whole financial system is frozen
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    and things get dark
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    everybody starts going bankrupt
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    but that's not all the investor calls up
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    the homeowner
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    and tells him that his investments
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    are worthless
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    and you can begin to see how the crisis
  • 00:10:38
    flows in a cycle
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    welcome to the crisis of credit
  • 00:11:09
    you
タグ
  • credit crisis
  • subprime mortgages
  • CDOs
  • financial disaster
  • investors
  • homeowners
  • frozen credit markets
  • default
  • housing prices
  • financial system