Subprime Lending

Paper Summary:

This paper discusses how the subprime mortgage crisis in the United States affected financial markets all over the world. The author defines financial crisis as a situation brought about when money demand and money supply are out of whack and asserts that this is especially true in today's global economy when financial firms routinely depend on each other for financing and liquidity no matter where they are located. Studying other research on the financial crisis, the author states that the financial crisis is the result of banks and lenders tightening credit availability and that the new technology being created primarily in the United States creates opportunities for such events to take place. The paper explains how the subprime mortgage crisis started a snowball effect that developed into a global financial crisis and concludes that as the world becomes more and more globalized the mistakes of a few will end up affecting the many.

From the Paper:

"Wall Street would probably agree with him on this case, at least if they were honest with themselves they would. Wall Street has always been on the forefront of creating investment opportunities and vehicles that create additional profits, not necessarily for the investors, but most definitely for themselves. Some of those investments are the core of the current debacle and may ultimately have a rippling effect on many individuals, communities, countries and governments."

Sample of Sources Used:

• Aldrich, P.; (2008) UK banks preparing to access BoE's emergency liquidity scheme, Telegraph, Telegraph Media Group Limited 2008, accessed May 18, 2008 at http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/05/16/cnbank316.xml
• Altfest, L.J.; (2008) What the subprime mess means to you, Medical Economics, Vol 85, No. 2, p. 24
• Andriotis, A.; (2008) Five Cities With Biggest Decline in Home Values, Yahoo Real Estate, http://promo.realestate.yahoo.com/five-cities-with-biggest-decline-in-home-values.html, accessed May 19, 2008
• Baeb, E.; (2008) Office space tightens up, Crain's Chicago Business, Vol 31, No. 7, p. 14
• Bernstein, P.L.; (2008) On failures of information flows, Journal of Portfolio Management, Vol. 34, No. 2, p. 1

More papers on Subprime Lending:

• Term Paper # 124288 : "The Subprime Lending Crisis"
• Term Paper # 114716 : "Developments in the Subprime Market in the U.S"
• Analytical Essay # 146420 : "Subprime Real Estate Mortgage"

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