Download Financial crisis

What is Financial Crisis?
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Financial Crisis is a big economy problem
that could affect a lot of people
So,how was it started?
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First, improper real estate financial policies of the U.S.
government is foreshadowed the crisis. Home Ownership was
part of the American dream. In the 1930s during the Great
Depression, the U.S. domestic demand flagging, one of the
decisions of the New Deal is the establishment of Fannie Mae
housing finance for the nationals, to help people to buy
homes, to stimulate domestic demand. In 1970, the United
States has established a considerable Freddie Mac, the scale
of Fannie Mae. "Two rooms" is a privately held enterprise,
but enjoy the privileges of the implicit guarantee of the
government, and thus its debt and U.S. Treasury bonds with
the same rating. From the beginning of the last century, in the
case of loose monetary policy, asset securitization and
financial derivatives product innovation faster, the size of the
implicit guarantee of Fannie Mae and Freddie Mac "the rapid
expansion of its direct holdings and guarantees mortgage
loans and mortgage loans for mortgage securities by $ 740
billion in 1990 to explosive growth to $ 4.9 trillion by the end
of 2007. In the process of rapid development of the business,
"two rooms" overlooked asset quality, which become a
"hotbed" of the subprime mortgage crisis.
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Second, financial derivatives "abuse", stretched a chain of
financial transactions, fueling speculation. "Two rooms" by
buying loans with poor mobility of commercial banks and
mortgage companies, asset securitization, its conversion into
bonds for sale in the market, to attract investment banks and
other financial institutions to buy, while investment banks take
advantage of the "superb" of financial engineering technology
and then split, packaged, combination and sold. In this process,
the first dollar loan can be enlarged to a few dollars, or even
more than ten million of financial derivative products, thereby
lengthening the chain of financial transactions, and ultimately,
that no one would care about the true fundamental value of these
financial products , which further contributed to the occurrence
of short-term speculation. But speculation is only appearance,
greed is the essence. Lehman Brothers, for example, its research
capacity and financial ability to innovate is the best in the world,
do not they know better than the meaning of risk itself was
eventually escape the collapse of doom, however, the reason is
that the management of the Lehman Brothers and about 1/3 of
the company's stock held by employees, and only know to go
crazy speculative money, and less consideration to the interests
of other shareholders.
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Third, the U.S. monetary policy fueled. In order to deal with
the year 2000 after the Internet bubble burst, from January
2001 to June 2003, the Fed's 13 consecutive times to cut the
federal funds rate, the interest rate from 6.5% to 1%, the
lowest level in history, and to stay at the 1% level for a year.
Low interest rates lead the American people to take the
savings invested assets, the bank loans too much, which led
directly to the continued expansion of the real estate bubble in
the United States. And the Fed's monetary policy is "to
induce" market form a expected: as long as the market
downturn, the government bailout, and thus the entire Wall
Street was filled with speculation breath. However, when the
continuous tightening of monetary policy, the real estate
bubble began to burst, First rise in default rates low credit
class, arising from breach of contract craze began sweeping
all profitable financial institutions eager, ambitious.
How could it affect us?
First,.....

The things like food, oil will be more
expensive in a fast speed. It cause many
people can't buy food.
Second,......
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When a bank go bankrupt, all the money
that people save in this bank will be all gone.
Lehman Brothers is one of the example.
This teach us a lesson.
Don't be greedy!