Why did the financial crisis happen?

According to international practice, the mortgage loan for house purchase is a down payment of 20%-30% and then a monthly repayment of principal and interest. In order to stimulate real estate consumption, the United States implements a "zero down payment" for buying a house. It does not need to repay the principal and interest within six months, and only pays the interest without repaying the principal within five years, and even allows buyers to mortgage the value-added part of the house price to the bank again.

2. Mortgage securitization

For the sake of liquidity and risk diversification, American bank financial institutions package mortgage loans, including subprime mortgages, and sell them to social investors through investment banks. The huge real estate bubble is transmitted to the capital market and further to the investors in the whole society-shareholders, enterprises and various banks and institutional investors around the world.

3. Alienation of investment banks

Investment banks are financial intermediaries, but American investment banks are confused by the huge profits of mortgage securitization transactions and their roles are alienated. While earning intermediary fees by underwriting bonds, large-scale trading of subordinated bonds gains income. Figuratively speaking, it is from a casino banker to a gambler or even a banker. The alienation of roles not only makes the mediator lose justice, but also drags himself into the quagmire.

4. The financial leverage ratio is too high

The financial market must be stable and the financial leverage ratio must be reasonable. American financial institutions unilaterally pursue excessive profit expansion, using a very small proportion of their own funds to achieve scale expansion through a large number of liabilities, and the leverage ratio is as high as 1: 20-30 or even 1: 40-50.

5. Credit default swaps (CDS)

The leverage ratio of financial investment in the United States can reach 1: 40-50 because of the existence of CDS system, and credit insurance institutions provide guarantees for these high-risk financing activities. If the financing party has financial problems, it will be paid by the institution providing insurance. However, in the absence of default, insurance institutions can not only obtain risk compensation, but also publicly sell CDS in the market.

6. Hedge funds lack supervision.

The interaction of the above five links formed the source of the financial crisis in the United States, and the hedge fund of "chasing up and killing down" accelerated the fermentation of the crisis. There are a large number of hedge funds in the United States that lack government supervision. When the American economy developed rapidly, hedge funds made many commodity markets, such as pushing oil to the sky-high price of 147 dollars; After the subprime mortgage crisis broke out, hedge funds frantically shorted the US stock market, which accelerated the collapse of the whole system.

Extended data:

The financial crisis is a crisis in the financial field. Because financial assets are highly liquid, finance is very international. The fuse of the financial crisis can be any country's financial products, markets and institutions.

The financial crisis is characterized by people's expectation that the future economy will be more pessimistic. The currency of the whole region has been greatly devalued, the economic aggregate and scale have been greatly reduced, and economic growth has been hit, which is often accompanied by a large number of business closures, rising unemployment rate, general economic depression in society, and sometimes even social unrest or national political turmoil.

References:

Baidu Encyclopedia-Causes of Financial Crisis