What is the subprime mortgage crisis?

Introduction: How did the subprime mortgage crisis occur? What is the extent of the impact? Why are sectors in other parts of the world constantly affected by the U.S. subprime mortgage crisis? The following is what I think What is the subprime mortgage crisis you brought about? I hope it will be helpful to you.

On September 15, 2008, Lehman Brothers, a well-known American company in the international financial community, was hit by the subprime mortgage crisis. The government refused to borrow assistance and applied for bankruptcy protection in the court. The fourth-largest investment bank with a 158-year history that withstood the Wall Street stock market crashes of 1929 and 1987 in the United States collapsed. Stock markets in the United States, Europe and Asia plummeted upon hearing the news, and some countries even stopped trading in the stock market. Stock trading. This marked the outbreak of the financial crisis after the subprime mortgage crisis. A series of sudden "changes" such as Merrill Lynch's "commitment" to Bank of America and AIG's emergency crisis revealed the pattern of a full-scale financial crisis. In 2003, the United States participated in the Iraq War. The subprime mortgage crisis in 2008 created huge hidden dangers for the U.S. economy. Although the Iraq War temporarily resolved the domestic crisis in the United States, it did not fundamentally change the loss of U.S. funds, and the twin deficits increased sharply. , the fate of the economic downturn. When it fought in Iraq, the U.S. war budget was about 50-60 billion US dollars, and it was thought that it would be a quick victory. As a result, from 2003 to 2009, the United States stayed in Iraq for six full years and spent more than $800 billion. The Iraq War has magnified the U.S. national debt, fiscal deficit, and trade deficit. This is a very urgent situation facing the United States. This historical burden falls on American real estate. In order to stimulate the country's economic growth, the U.S. government made a choice around 2000 and called on Americans to buy houses. The Federal Reserve has also adopted a loose monetary policy, continuously cutting interest rates, keeping loan interest rates very low, and using real estate to boost the U.S. economy, allowing the U.S. economy to continue to prosper. Encourage poor Americans to buy houses and create a real estate boom. Create a bigger bubble to plug the black hole left by another bubble. At that time, the United States had a population of 350 million, and there were still many people who had not yet bought a house. First, we should search for the rich people who own houses, so that they can buy villas first, and let the middle class people who live in small houses move to larger houses. If we further mobilize blue-collar workers without housing to buy houses, how much demand for real estate will be created. So, subprime mortgages appeared. Banks began to lend money to people with good credit. At first, people with high credit ratings bought houses. Later, there were fewer and fewer high-quality customers and business was difficult to do. Commercial banks relaxed the conditions so that people with lower credit ratings could also buy houses. Make money when you pay for goods. But the rules of commercial banks are still blocking it. Therefore, the intermediary company came up with a way. As long as the lender agrees to buy a house, although his credit is very poor, the commercial bank can fill in his credit record as excellent, and then he can apply for a mortgage loan. It's just that the interest rate for commercial banks lending to high-quality customers is 5%, while the interest rate for lending to people with low credit ratings is 10%. Such interest rate spreads are very profitable for commercial banks. The commercial companies then hand over the subordinated debt to investment banks, and both home sellers and home buyers are happy. Commercial banks bear all risks. And once house prices fall, buyers can't pay and the house loses value, and banks will face huge losses. In this way, commercial banks pool all housing loans together to form a mortgage-backed security. Finally package it for the whole world. This led to a serious subprime mortgage crisis, which in turn worsened the U.S. economy and led to a serious financial crisis.

The birth of various financial derivatives and the "abuse" of financial derivatives have lengthened the financial transaction chain and encouraged speculation. Fannie and Freddie purchase illiquid loans from commercial banks and mortgage companies, convert them into bonds through asset securitization, and sell them on the market, attracting investment banks and other financial institutions to purchase them. Investment banks use "superior" financial engineering technology , then divide, package, combine and sell them. In this process, the initial loan of one yuan can be enlarged into financial derivatives of several yuan or even more than ten yuan, thus lengthening the chain of financial transactions. In the end, no one cares about the true basic value of these financial products. This further encourages short-term speculation. But speculation is only the appearance, greed is the essence. Take Lehman Brothers as an example. Its research capabilities and financial innovation capabilities are world-class. No one understands the meaning of risk better than them. However, it cannot escape the fate of collapse. The reason is that the management of Lehman Brothers Employees and employees hold about 1/3 of the company's stocks, and they only know how to speculate crazily to make money, while paying less attention to the interests of other shareholders. Finally collapsed.

The financial crisis broke out and swept the world.

The U.S. subprime mortgage crisis was a storm caused by the bankruptcy of subprime mortgage lenders, the forced closure of investment funds, and violent stock market fluctuations. It led to a crisis of insufficient liquidity in major financial markets around the world. The U.S. subprime mortgage crisis began to gradually emerge in the spring of 2006. By August 2007, it swept through the world's major financial markets such as the United States, the European Union, and Japan. The U.S. subprime mortgage market usually adopts a repayment method that combines fixed interest rates and floating interest rates, that is, home buyers repay the loan at a fixed interest rate in the first few years after purchasing the home and then repay the loan at a floating interest rate.

With the cooling of the U.S. housing market, especially the increase in short-term interest rates, the repayment interest rates of subprime mortgages have also risen sharply, and the loan repayment burden of home buyers has greatly increased. This situation directly led to a large number of subprime mortgage borrowers being unable to repay their loans on time, thus triggering the "subprime mortgage crisis." As the only superpower in the world, the outbreak of the subprime mortgage crisis in the United States instantly affected financial centers around the world and some neighboring countries. Its scope was far from just the subprime mortgage crisis, but spread to the entire financial industry. Although the U.S. current account deficit has been declining, it still accounts for about 6% of GDP. Because Americans consume far more products than they produce, Americans remain one of the largest sources of demand for the rest of the world, and the sharp decline in demand is extremely It greatly affected the economy of other regions and once caused panic in countries all over the world. Data released in November showed that after Japan admitted that its economy had fallen into recession after two consecutive quarters of decline, the euro zone has entered its first recession since its birth, while the deterioration of many economic indicators in the United States has reached the worst level in 30 years. It is also on the verge of recession, and the slowdown in economic growth in emerging markets has become a reality. From North America to Europe to the Asia-Pacific region, in the past month, a series of measures to stimulate the global economy have been introduced in response to the financial crisis. These measures are another round of rescue measures taken by various countries to target the real economy after rescuing the virtual economy.

This outbreak of the crisis has given us a lot of inspiration.

One of the inspirations is that market mechanisms and government intervention must complement each other.

The modern economic history of the United States shows that market mechanisms and government intervention must complement each other. The Great Depression of the 1930s in the United States was the result of the government's long-term economic policy of laissez-faire and non-intervention in the monopoly of large enterprises. After Roosevelt became the President of the United States in 1933, he implemented the "New Deal", which strengthened the government's macro-intervention in economic and social development, making market mechanisms ("invisible hand") and government intervention ("visible hand") complementary to each other.

After the end of World War II, all capitalist countries have strengthened government macro-intervention in economic and social development. However, since the 1980s, the U.S. government's economic policy has emphasized laissez-faire and "less government intervention." Especially since the beginning of the 21st century, as financial derivatives have emerged one after another and expanded rapidly, the lack of financial supervision in the United States has led to the outbreak of a serious financial crisis. After the crisis broke out, the U.S. government took rescue measures, but it was too late. The president-elect said that he will further strengthen macroeconomic intervention after taking office in the White House, but he will face many difficulties. It is worth noting that to prevent the evolution from "market supremacy" to the government "doing everything", market mechanisms and government intervention should be insisted on complementing each other and each fulfilling its responsibilities.

The second inspiration is that the virtual economy and the real economy must develop in a coordinated manner.

The virtual economy mainly includes finance, insurance and related service industries and real estate service industries. The virtual economy should develop in coordination with the real economy and gain expansion and benefits on the basis of serving the real economy. However, in recent years, the virtual economy in the United States has developed excessively. In 1999, the U.S. Congress passed the Financial Services Modernization Act, which focused on allowing mixed financial operations. It replaced the Banking Act of 1933 and formally eliminated the restrictive conditions for separate operations of commercial banks and investment banks. In 2000, the U.S. Congress passed the Commodity Futures Trading Modernization Act, which stipulated that commodities that are not traded over the counter are not subject to the supervision of the Commodity Trading Commission. These two bills created conditions for rampant speculation and the expansion of financial derivatives.

As early as 2003, American investment guru Warren Buffett warned that financial derivatives "are weapons of mass destruction" and "a time bomb for the parties involved and the economic system." However, the US government ignored this. According to statistics from the Bank for International Settlements, as of the third quarter of 2007, the global market value of financial derivatives has reached US$681 trillion, half of which is in the United States, and the other half is mainly in Europe. This is the root cause of Europe and the United States becoming the hardest hit by the financial crisis. The third inspiration is that the increase in wealth and social distribution must be fair and equitable.

Federal Reserve Chairman Ben Bernanke pointed out that "unfair and fraudulent behavior" by lenders in misleading borrowers was the main cause of the subprime mortgage crisis.

The evolution from the subprime mortgage crisis to a serious financial crisis has exposed the shortcomings of some large companies and large consortiums that use all means to make huge profits, leading to an ever-widening income gap. The USDA pointed out that 11.1% of households in the United States, or 36.2 million people, were food insecure in 2007. Paul Krugman, the American Nobel Prize winner in economics, pointed out in his book "What's Wrong with America? The Conscience of a Libertarian" published this year that in the 1970s, the average income of executives of large American companies was that of ordinary employees. 40 times, and now this number has become 367 times.

Krugman believes that this is not just a matter of social equality, but the collapse of the basic beliefs and morals that the United States once had;