The Economy and the Financial Crisis

Comment

Comment by Severino Bento Ferreira Junior on June 9, 2009 at 6:27pm

How did we got into this mess? This is the good question that make us think about the sustainability of our businesses. After this *very* good speech, I will be far cautious before digging into business processes and strategies (my principal role) without having 'profits sustainability' in mind.

Comment by Leonard Paul Specterman on May 25, 2009 at 2:05pm

A very clear explanation of how banks and others went pear-shaped! Unbelievable that auditors didn't see the problem and more importantly, the vital role of the ratings agencies. In the UK, Vince Cable's book 'The Storm' reinforces from the UK standpoint.

Comment by Diane Mesgleski on March 4, 2009 at 8:04pm

It is interesting to get an informed perspecitve from outside of the mortgage lending industry. I have twenty years experience in the residential mortgage industry. Most of that was spent in the wholesale lending side of the business. From my perspective, the housing/real estate bubble burst first...causing the mortgage industry to implode. For years values were growing steadily, and our lending practices were geared towards that growth. Appraisals gave values based on a healthy real estate market...and the mortgage industry leant on those predictions. The subprime sector, which really was not a large percentage of the total, was completely dependant on the growth. Subprime borrowers came in to the market in the early 90's, when the government pressed lenders to make home ownership a reality for those who would not qualify under conforming guidelines. The thought was, get them in the house at a high LTV (loan to value_ and when the value of the home increases, refinance at a lower ltv, with a lower rate. What ended up happening, is that many of these new homeowners found themselves with credit card offers, which they accepted and used.....when it came time to refinance it was necessary to pay off that debt just to qualify under normal underwriting guidelines. This became an accepted and normal practice. When values declined...these people found that the well was dried up. Foreclosures were added to the real estate market. People who were afraid that their homes were not going to increase in value flooded the market. This further exacerbated the problem. I could go on and explain how mark to market brought down otherwise prudent lenders....and how fannie mae and freddie mac were the biggest NO DOC perps out there...but it would take quite some time. Let me close by saying that fraud was not as rampant as the media would have you believe....quite the opposite. And when lenders began ONLY offering full doc loans...well, business fell by 70^. You know, the GNP really does not tell the full story of what people are earning. There is a HUGE amount of income that is completely unreported, "under the table". The mortgage industry had to find a way to acknowledge this fact unoffically. When they stopped, another layer of trouble was added to a faltering industry. Thank you for allowing me to add my "insider" comments. DM

Comment by ramesh rao on March 4, 2009 at 12:15am

good for digging the facts i would like to know the what are world class universities are doing how come they fail to consulting the Us Government is it we are going to learn the professionalism from americans the universities and the world class professionals are in US and collect their opinions and include in your future classes. more digging is required to analyse and take appropriate decisions plan the future economy well and alert.

Comment by Faraz Qureshi on March 2, 2009 at 2:35pm

Thank you. Just FYI for all, I found this video to be very good explanation of the credit crisis: http://crisisofcredit.com/

Comment by Janet Walker on February 16, 2009 at 9:53am

Thank you.

Comment by Harsh Pant on February 15, 2009 at 3:49am

The same things that are in your lesson presented in a funny way:-)
(Google: (The Long Johns + Financial Crisis)
http://www.intentblog.com/archives/2009/01/have_a_laugh_fi.html

Comment by jose luis faudoa on February 9, 2009 at 8:25pm

Well, you're my best English school internet. On the other hand, when the bank sub-prime was easy to make money. I wonder who did not, I remember well when it came to the office and promote their product and what they paid. I also remember as were disappearing. All learned something, but I wonder who won the final and where was that much money.

Comment by Jack Sandler Bloom on January 28, 2009 at 11:39pm

Ralph, There are millions of peaceful Muslims, and we cannot visit the sins of a father on the son. The development of financial instruments complying with Shariah law will help modernize and make better the lives of millions of people who are peaceful, loving, wonderful people. Everything can be used for good or bad. A butter knife spreads butter. Another kind of knife kills people. It is not the instrument, it is how it is used. Islamic charities are subject to great scrutiny. We need to build bridges to people. Terror is spread because of a violent ideology. It is this ideology that must be confronted and contained, not insurance products. Thank you.

Comment by Ralph on January 28, 2009 at 5:07pm

Thanks for the explanation. It amazes me to find out what companies like AIG and WaMu did and why they failed. What really puzzles me is that a company, like AIG, who has received bail-out money, continues to do things that seem socially stupid!! I recently read in Investor's Business Daily about a line of insurance AIG is coming out with that complies with Muslim Shariah law. It seems that some of the profits from selling this homeowner's insurance must be "purified" by investing in Islamic charities. Many Islamic charities have been shut down by the Fed's because they were found to be funding terrorist organizations. And one of the men sitting on the supervisory board for this insurance product, Muhammad Imran Usmani, is the son of an outspoken Sheik show supports violent jihad against Westerners. Why would an American company take American money and give control over it to a man who may invest it in charity(s) that seek to destroy America and Americans? --Certainly beets me.

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