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Slide 2: Credit Crisis 2007-2008 By: Raution Jaiswal Willamette University (Atkinson Graduate School of Management)
Slide 3: Eventful 2008 March - Bear Stearns: Sale to JPMorgan @ $10; $29bn loan from Fed July - Fannie Mae / Freddie Mac $200bn commitment September - Lehman Brothers Holdings Files for bankruptcy sold to Barclays September - Merrill Lynch sold to Bank of America for $50bn. September - AIG: Treasury provides $85bn September - Washington Mutual failed and sells branch system to JPMorgan for $1.9bn.
Slide 4: How are financial sector stocks doing? DJIA XLF Financial Sector SPDR ETF
Slide 5: Changing Landscape + + + + + + 4 New bank holding companies
Slide 6: Chain Reaction
Slide 7: Who to blame?
Slide 8: Heroes & Villains Lack of Prudence at All Levels Homeowners Mortgage Brokers Commercial & Investment Banks Securities Underwriters Credit Rating Agencies Corporate Investors Corporate Shareowners Regulators
Slide 9: Issues Moral hazard Conflicts of Interest Regulation Financial engineering
Slide 10: Top 8 lessons from the credit crisis 1. 2. 3. 4. Economy is essentially not predictable and understandable Risk needs respect Models have their limits Regulation has its limits too
Slide 11: Top 8 lessons from the credit crisis 1. 2. 3. 4. (Il)liquidity is the ultimate killer Monetary policy-single focus is price stability Accounting can change everything The double edged sword of leverage
Slide 12: lit