Government,
When? Who?
Investment Bank,
Financial Institution,
Sub-Prime Borrower…
How?
Bursting of housing bubble What is happening?
Globa
Sub-prime borrowers Increase Unemployment
increase Bank incur huge losses
Overheated housing Financial GDP drop
market Increase Inflation
Housing prices declined
Crisis Decreased in Real wages
Default rate INCREASED! Housing prices plummet
CHINA
• Short-term interest rates near zero 0 Government introduced a 4 trillion Yuan
-.Created Commercial Paper Funding Facility
stimulus package
+ Injected equity capital into banks
0 Local government proposed stimulus packages
Increased deposit issuance of 18 trillion yuan
+ Loan guarantees for newly-issued Government Reaction° Central government issue 200 billion yuan in
bank debt
• – government bond
lteeillary expansion JAPAN
0 Reductions in interest rates
0 Signed swap facility
with US Fed
0 Introduced ‘complementary
deposit facility’
0.Loans to financial institutions
0•Policy credit easing’
• .• Special Funds-Supplying
Operations
SINGAPORE AUSTRALIA
0820.5 billion hence Package °Guarantee bank deposits
0 Jobs Credit Scheme and 0510.4 billion payments
Special Risk-Sharing Initiative 0$47 billion was allocated,
is NEUTRAL. 0 Entered $30 billion swap Schools
Crisis may happen again if bankers and derivatives with Federal Reserve 20000 new homes
are still giving out loan without undergo proper Insulate 2.7 million homes
procedure, selfishness between the bankers and 0 Relaxed leverage ratio Road repairs and infrastructure
derivative.Hence, an appropriate policy is necessary Small business tax breaks
to maintain the smooth flow of money. Cash bonuses
Moral of the story
‘hat should government learn? How to prevent is probably false
this crisis to happen again? Think wisely before
you went into mortgage
watchdog agency, risk management,
ifinancial advice..
rapidly changing conditions a !Continuous-work-out-mortgage Don’t just buy a house.
:xpectations -terms adjusted continuously but own a house.