What is subprime mortgage?
American subprime mortgage has a long history. Bank of America divides consumers' credit ratings into excellent and secondary, with those who can pay on time being excellent and those who cannot pay on time being secondary. The consumers of subprime loans are all people with bad reputation. For many years, American banks have lent money to them by means of mortgage loans. The so-called mortgage loan is mortgage payment. When buying high-grade goods such as housing, mortgage loans are often used to pay in installments. The financial crisis in the United States happened on the subprime mortgage, and the English name is sub-prime mortgage crisis, so it should be called the subprime mortgage crisis more accurately. It is not accurate to call it the subprime mortgage crisis.
The ultra-loose environment that stimulates the economy has buried hidden dangers.
On April 2, 2007, New Century Financial Company, the second largest subprime lending institution in the United States, declared bankruptcy, marking the outbreak of the subprime mortgage crisis in the United States. The source of the subprime mortgage crisis is its loose monetary policy in the early stage. After the bursting of the new economic bubble and the "9. 1 1" incident, in order to avoid economic recession and stimulate economic development, the US government adopted measures to encourage investment and consumption by lowering bank interest rates. From 2000 to 2004, the Federal Reserve cut interest rates for 25 consecutive times, and the federal funds rate dropped from 6.5% to 1%. There is no guarantee or down payment for loans to buy a house, and the rising house prices have made the real estate market increasingly active, which has also contributed to the economic prosperity in the late Greenspan era. It is a good thing to provide subprime loans, so that low-income people can afford to own their own houses. For ordinary families, low interest rates and soaring real estate prices have created a bright future, and investing in housing has become a huge temptation.
According to the data of the Federal Reserve, the fastest period of subprime mortgage development was from 2003 to 2006, and these years were precisely the period with the lowest interest rate. Lenders made huge profits. Lenders have repeatedly won "appreciation" and bought 500,000 houses. Two years later, the price rose to $600,000. Lenders will buy several houses with houses as collateral, and then lend money, so that they can easily profit from the rise in real estate prices. By the end of 2006, subprime loans involved 5 million American families, and the known subprime loans reached 1. 1 trillion to 1.2 trillion dollars.
Taking real estate as collateral is the key to risk.
American subprime consumers use real estate as collateral, and the price of real estate determines the value of collateral. If house prices keep rising and collateral prices keep increasing, it will not affect consumers' credibility and repayment ability. Once the house price falls and the collateral depreciates, the money that the same house can borrow from the bank decreases. If the loan interest rate increases, the floating interest rate will also rise with the subprime mortgage, and the money to be repaid will increase greatly. Subprime lenders are low-income people, and they have to give up their property rights because they haven't got loans yet. Lending institutions cannot recover loans, but can only recover the lender's property. Recyclable property can't be sold, but it keeps depreciating and shrinking, so there is a loss, and even the funds can't flow out. House prices are shrinking and interest rates are rising, which is the killer of subprime loans.
In 2005-2006, in order to prevent market consumption from overheating, the Federal Reserve raised interest rates by 17 times, and the interest rate increased from 1% to 5.25%, and the market interest rate entered an upward cycle. Because the transmission of interest rates to the market often lags behind, American subprime loans rose in 2006. However, the effect of raising interest rates gradually appeared and the real estate bubble began to burst. According to the report of Standard & Poor's Company, in 2007, American house prices fell by 8.9%, the biggest drop in at least 20 years. At present, house prices across the United States have fallen to the lowest level since 2004. From February to March, 2007, some subprime mortgage companies in the United States began to expose problems.
Comparatively speaking, the housing loan in France is based on family income rather than property mortgage; During the repayment period, most low-income borrowers have to register for unemployment insurance, so the landlord is the borrower with repayment ability. The repayment ability of French housing lenders does not depend on house prices, but on the disposable income of families. In the economic fluctuation cycle, the fluctuation of house price is much higher than that of disposable income, which is also an important reason why there is no mortgage crisis in France. Germany implements a unique "deposit before loan" contract savings model, accounting for about half of the total mortgage, another 30% of housing loans come from commercial loans, and the rest come from household savings. All mortgages in Germany are subject to a fixed interest rate system, and the interest rate of savings mortgages is lower than the market interest rate, with an average term of 1 1.5 years. This long-term mortgage interest rate cycle can resist almost any financial market fluctuation.
The securitization of sub-prime loan assets aggravated the spread of the crisis.
The vast majority of mortgage institutions in the United States are regional savings banks and savings and loan associations, and local commercial banks also participate in mortgage loans. The financial strength of these institutions is not very strong, and a large amount of funds are put on housing mortgage loans, which has caused serious pressure on their capital turnover. Some financial institutions with "financial innovation" tools package these credit assets and issue negotiable bonds as guarantees. Give a fairly attractive fixed income and sell it. Many banks and financial institutions, such as asset management companies, hedge funds, insurance companies and pension funds, invest in these bonds. Mortgage enterprises have a steady stream of financing channels, creating a rapid growth of new subprime loans; Investment institutions get higher returns. Since 200 1, the large-scale expansion of American subprime mortgage has also accelerated the securitization of subprime mortgage. In 200 1 year, the securitization rate of subprime loans was 45.8%, which soared to 67.2% in 2004. In 2005, this proportion further increased to 74.4%. These American subprime bonds are basically distributed in five types of financial institutions, including banks (3 1%), asset management companies (22%), hedge funds (10%), insurance companies (19%) and pension funds (18%).
American financial derivatives and financial innovation are the most advanced in the world. All kinds of financial derivatives make the cash flow of investment institutions and life more reasonable, the income is also decomposed and shared, and the risks are also shared. However, everything has two sides. Financial innovation system will not only bring risk dispersion mechanism to family development, but also produce risk amplification effect. The innovation of subprime mortgage has made those residents in the United States who can't meet the standard of housing mortgage loan buy houses, and at the same time, through asset securitization, they have become subordinated debts, which have loaded high risks with high returns and spread all over the world. In this sense, all countries that have bought the US subprime mortgage debt will be forced to "pay the bill" for the US subprime mortgage crisis. When the real estate bubble bursts and the subprime lenders can't repay their loans, not only the mortgage companies are in a loss dilemma and can't pay a fixed return to the financial institutions that buy subprime loans, but also those investors who buy subprime derivatives lose high returns because of the falling bond market price, which also leads to liquidity shortage and loss. Since the third quarter of 2007, financial institutions began to report huge losses, reflecting the sharp decline in the value of mortgage loans and other assets. By the end of June 5438+ 10, 2008, large banks and securities companies, such as Huaqi, HSBC, UBS, Merlin and Morgan Stanley, had written off more than $90 billion in losses related to subprime loans. The list also includes Societe Generale in France, BNP Paribas in France, Northern Rock Bank in Britain, UBS Group AG in Switzerland, and then German banks that have bought a lot of bonds.
The information asymmetry of subprime mortgage securitization aggravated the financial turmoil.
The securitization process of subprime loan assets is actually a process of combination and credit enhancement, and it is also a process of superposition of various assets and various credit subjects. After asset securitization, the information disclosure and related risk information of this asset securitization portfolio may become more opaque, resulting in few people in the market being able to clearly understand the risk institutions, let alone make real-time risk pricing. Due to the lack of understanding of the real value and risk of assets, investors rely largely on the reports of rating companies to make decisions. The credit rating of credit rating agencies is playing an increasingly important role in the financial market, and credit rating is also an indispensable link in the process of asset securitization. Whether the credit rating is objective and fair, whether financial instruments are truly understood, and whether there are conflicts of interest and moral hazard. These factors will have a great impact on the global financial market. Subprime mortgage bonds were originally developed from some low-quality assets. "Financial innovation" made these low-quality assets get AAAd high-grade labels through the rating of credit rating companies, which proved to be seriously overvalued afterwards. For example, after the subprime mortgage crisis, Moody's re-evaluated the first batch of subprime loans listed in 2006-2007. Results Only 265,438+0% of the mortgage bonds originally rated as A were still rated as A, 43% were downgraded from A to Ba, and 27%, 9% and 65,438+0% were downgraded to BA, B and Caa respectively. Only 65,438+02% of the subordinated debts with Baa rating are still rated as Baa after re-rating, while the proportion of subordinated debts with Baa rating downgraded to Ba, B and Caa is 32%, 23% and 32% respectively. After re-rating, only 4% of the subordinated debts of Ba level remain at this level, 65,438+04% are reduced to B level, and 82% are reduced to Caa level. Some people accuse rating agencies and investment banks of "collusion", making a large number of investors a credit trap.
Due to information asymmetry and unknown risk loss, once there are significant risks and losses in subprime mortgage loans, the credit enhancement and credit superposition based on these securities will "collapse instantly" like castles in the desert, which will inevitably cause investors' panic in investment confidence, and the instinct of avoiding risks will accelerate investors' selling, aggravate the turmoil in financial markets, and financial disasters will be inevitable. In the risk transmission chain of subprime mortgage, securitization and credit derivatives, the subprime mortgage crisis may not happen at all without the participation of credit rating companies. Former US Treasury Secretary Lawrence Lawrence Summers commented, "The subprime mortgage crisis is to credit rating agencies what Enron is to accounting firms."
The impact of the subprime mortgage crisis will continue.
The impact of the US subprime mortgage crisis is first concentrated in the financial sector. The first wave is some lenders engaged in subprime mortgage business. Many subprime mortgage companies suffered serious losses and were even forced to apply for bankruptcy protection. Hazu, chief American economist of Goldman Sachs, said that the total loss of American housing mortgage loans will reach 500 billion US dollars, which is higher than market expectations; Then, some American and European banks, funds and other investment institutions that bought such investment products also suffered heavy losses. Bear Stearns, the fifth largest investment bank in the United States, was acquired by JPMorgan Chase, BNP Paribas suspended its three fund transactions in the US mortgage business, and Citigroup lost $9.83 billion in the fourth quarter of 2007. Then expand to other financial fields. Banks generally choose to raise loan interest rates and tighten the standards of industrial and commercial loans, commercial mortgage loans and credit cards, resulting in insufficient liquidity in major financial markets around the world, and European and American stock markets have fallen sharply. To this end, the United States, Europe, Britain, Switzerland and other central banks continue to inject liquidity into the market and take measures to cut interest rates. The violent storms in the United States temporarily suspended the financial market, but the impact of the crisis on American consumption and economy continued to expand, and the economic development of the United States slowed down significantly and was on the verge of recession. Mainly manifested in: First, the domestic economic demand is shrinking. In the fourth quarter of 2007 and the first quarter of 2008, the GDP growth rate of the United States was 0.6%, the lowest level in five years. In the first quarter of 2008, personal consumption expenditure only increased by 1%, the smallest increase in recent seven years. Second, the housing construction and automobile sectors have dried up, and other economic sectors and the labor market have also tended to be weak. Third, economic growth in most areas has slowed down and there has been a local recession. Among them, California, Nevada and other five "housing bubble week" economies (accounting for about 25% of US GDP) have basically fallen into recession.
Judging from the continuous decline in housing prices in the United States and the performance of financial institutions, the subprime mortgage crisis in the United States is far from over, and its impact will continue to expand. Compared with the Great Depression of 1930, in the subprime mortgage crisis, the amount of default loans increased sharply, financial institutions were forced to tighten credit, the financial intermediary function was seriously damaged, and the economy continued to decline, which was quite similar. From the historical experience, the economic adjustment caused by the bursting of the real estate market bubble takes a long time, ranging from short-term 3 to 5 years to long-term 10 years. At this time, the strong inflationary pressure brought by the soaring international crude oil and food prices further weakened the consumption power and the willingness of enterprises to invest, which aggravated the economic recession. Therefore, Alan Greenspan, former chairman of the Federal Reserve, said that the crisis that shocked the American market and the global economy may become the most serious crisis since the Second World War.
Why Financial Crisis Happened —— Enlightenment from American Financial Crisis
The bankruptcy of Lehman Brothers and the acquisition of Merrill Lynch have aroused investors' concerns about the US financial industry. New york stock market and European stock market plummeted, and China mainland stock market was also greatly affected. The Shanghai Composite Index fell 2000 points.
The international economic situation is suddenly grim. Former Federal Reserve Chairman Alan Greenspan said that the United States is in a once-in-a-century financial crisis, which will trigger a series of global economic turmoil. Earlier, Soros also said that the outside world is still worried about the debt repayment of financial institutions. Since 1930s, the financial system is on the verge of "rupture" for the first time.
What caused the financial crisis in America? To what extent will it affect China's economy? What measures can we take to deal with this crisis?
It is generally believed that the causes of the financial crisis are overproduction caused by overheated economy, huge deficit of trade balance, excessive inflow of foreign capital, inflexible exchange rate system, improper exchange rate level or premature financial opening. Why did the financial crisis first start in the United States, not from other countries? This is intrinsically related to the choice of American economic structure.
From the end of last century to the beginning of this century, the United States regarded two industries as economic engines, one was the information network industry, and the other was the financial services industry. With the bursting of the network economy bubble, the United States turned to vigorously develop the financial industry. 1999, the US Congress passed the Financial Services Modernization Act. The bill stipulates that banks are allowed to expand their services and business areas as long as they can operate sufficient capital. After 1930s, American banking suppressed regulation and supervision for decades, and then fully liberalized. Since World War II, the contribution of added value created by American financial industry to GDP has been steadily and continuously increasing. After liberalization, the financial industry has become more prosperous and financial derivatives have emerged continuously. At the same time, the United States is constantly transferring manufacturing to foreign countries. At this point, the degree of virtualization of the American economy has greatly improved.
There is no doubt that the virtual economy itself is an economy that is easy to breed bubbles. A little negligence in supervision can easily lead to the bursting of the bubble-financial crisis or economic crisis. As early as 2002, economist Cheng Siwei made some preliminary explorations on the deep-seated causes of the financial crisis from the perspective of virtual economy. In his view, the so-called virtual economy refers to the economic activities related to the virtual capital circulation movement mainly relying on the financial system, which is simply based on Qian Shengqian's activities. Virtual economy is complex, risky, parasitic and periodic. If the real economy is compared to a rock, the snow layer covering it is a virtual economy, and the thick snow leads to an avalanche. In other words, if the virtual economy and the real economy exceed a certain proportion, it will inevitably lead to a crisis. It is only a matter of time before the United States moves out of manufacturing and lets the financial industry develop freely. The rock stratum is thin and the snow is thick. Soros's worries stem from this.
Looking back at the present situation of domestic industrial structure, in recent decades, developed countries have moved to China, mainly manufacturing. For a long time, the manufacturing industry has been the bulk of GDP, so it can be said that the "rock mass" of China's economy is solid. However, under the influence of blindly optimistic economic stimulus signals, there are also phenomena of rapid growth of virtual economy and increasing economic bubble in China. Especially since 2005, the stock market has climbed to 6,000 points, and the real estate prices in major cities have soared, which has largely deviated from the actual level of China's real economy development. From this perspective, the decline of China's stock market and housing market is a normal adjustment.
In today's economic globalization, it is impossible for China not to be influenced by the external economy. To minimize the impact, it is necessary to find out the countermeasures as soon as possible in time and accurately, and persistently upgrade and optimize the industrial structure, instead of blindly pursuing the prosperity of the virtual economy.
Wall Street Financial Crisis: The US government is shooting itself in the foot.
In recent months, the most influential event in the world is undoubtedly the Warren Street financial crisis triggered by the subprime mortgage problem in the United States. In the words of economists, there was a "once-in-a-century financial tsunami" on Wall Street. The financial crisis on Wall Street not only hit the fragile economy of the United States, but also caused the collapse of the American stock market, which also brought great harm to the economies of other countries (such as China).
Why is there a serious financial crisis on Wall Street? How did the financial crisis on Wall Street come about? Many economists have done some analysis: the subprime mortgage problem in the United States is caused by the poor's inability to repay their bank debts, and the reason why they can't pay their debts is because the Federal Reserve keeps raising interest rates to control inflation, which greatly increases the loan debt of the poor in the United States. These views are undoubtedly correct, but in my opinion, these analyses still fail to touch the essence of the problem.
So what is the root cause of the financial crisis on Wall Street? In my opinion, the crisis on Wall Street comes from the selfish energy strategy of the US government. Originated from the unilateral hegemonic policy pursued by the American government all over the world; It stems from the Iraq war launched by the American government, and from the fact that the American government has made too many enemies all over the world, stretched the front too long and shouldered too heavy a burden. Finally, it crushed Wall Street.
People will never forget that in recent ten years, in order to implement its so-called absolute strategic security and safeguard the economic interests of Texas oil tycoons, the Bush administration of the United States has raised the oil price in the international market through hedge funds. It was high oil prices that crushed the American economy and Wall Street. ..
As we all know, in the Clinton era, the oil price was low, 1.998, and the oil price was $65,438 +0.2 per barrel. Cheap oil prices have supported the rapid growth of the US economy and kept the US interest rate low. The American stock market experienced the biggest bull market in history. Americans have enjoyed the greatest economic benefits and their national strength has greatly increased. However, after the Bush administration came to power, Americans were eager to show their strength around the world and pursue unilateral hegemonism. In order to suppress China's economic development, the United States began to try to control the world's oil and mineral resources and raise oil prices through hedge funds. In the eyes of American government policy makers, if you control oil, you will control China's economy, China and the world. As everyone knows, this short-sighted behavior of the US government not only failed to control China, but also harmed the United States itself.
Oil is an important strategic resource. Plastic industry, transportation industry and fertilizer industry are all inseparable from oil, and oil affects more industries. Clothing, toys, real estate and people's lives are all affected by it. As a result of high oil prices, on the one hand, the price of American goods has been raised, and at the same time, the pillar industries in the United States have been hit. It has raised the prices of goods exported to the United States all over the world, and the era when the United States enjoyed low prices of world goods has ended. On the other hand, high oil prices have enhanced the strength of oil exporting countries and given them the capital to confront the United States. In order to maintain hegemony, the United States has continuously increased its military spending and consumed a lot of American financial resources. Therefore, it constantly implemented expansionary monetary and fiscal policies, which eventually led to inflation. In order to control inflation, it keeps raising bank interest rates. Finally, it triggered the subprime mortgage crisis. Therefore, it can be considered that the rise of commodity market prices, especially oil prices, is the root cause of the "financial tsunami" on Wall Street. Although high oil prices have brought high profits to American oil companies, they have damaged the American economy. So the financial crisis on Wall Street is that the US government is shooting itself in the foot.
Wall Street "financial tsunami" road map;
The United States pursues hegemony-speculative funds push up commodity prices (oil prices)-inflation-the Federal Reserve raises interest rates-the debts of the poor in the United States increase-the poor can't pay their debts-the banks recover collateral (houses)-and house prices plummet.
The author boldly predicts that if inflation is reduced, the US economy needs to cut interest rates. However, if the US government continues to let speculative funds continue to do whatever they want in the commodity market, raise commodity prices (especially oil prices) and maintain high interest rates, then the US economy will not fundamentally improve. The decline of American economy is a foregone conclusion.