Chapter 1854

Some people may wonder, can these bad home buyers really be able to repay the loan?

Not to mention, people really have the ability, because at this time, the real estate industry in the United States is developing rapidly. House prices are one price a day, and house prices in a city can double in a year.

So there was a more strange situation. After these bad buyers bought a house through a loan, they immediately mortgaged their house to get a more loan.

One side of this loan is used to repay the loan for house purchase, and the other side is used to squander and enjoy a better life.

Such a transaction without capital naturally makes countless poor people, even proletarians and tramps join the army of house buyers, and the whole loan industry is booming.

As mentioned above, there are two explanations for the subprime crisis. The above explanations are for the first, subprime loans. What does the second subprime mean?

Very simply, it is a secondary loan extended from these loans.

Many financial companies and funds are very jealous when they see that various lending institutions make a lot of money through subprime loans, but they are not qualified to sell loans, so there is no access certificate to the market. People on Wall Street feel uncomfortable and heartbreaking!

If Wall Street never lacks smart people, they will soon find a way to get in, that is, through subprime financial products.

Those banks that can make loans soon find that the cash in their banks is about to shine, but there are still a lot of subprime loans coming in.

According to the financial management conditions of any country in the world, banks must first ensure their liquidity, that is, to ensure that there is a large amount of immovable funds in the vault for customers who come to withdraw money, which is the top priority to stabilize the whole banking industry. After all, once customers find that the bank deposit cannot be withdrawn, there will be a sudden run, It will completely collapse the whole bank.

But you let these lending institutions and banks look at these businesses, but they can't do it. They feel bad, so the geniuses of wall street came to the door.

They said that the completed loans can be packaged into a financial product, that is, financial fund to sell!

For example, a 20-year subprime loan with an annual interest rate of 5.6% and a stable repayment every month is an excellent fund project!

The bank will package the loan and sell it to the fund, so the bank can get a lot of cash, and the fund will increase the price of the loan and sell it to those investors, so that investors can get a huge interest every year.

At the same time, because this is a mortgage and the house is mortgaged there, there will never be a case that no one will buy the house, so this is indeed a foolproof fund product with high security and considerable interest!

Well, is this routine very familiar?

Yes, this is the routine used by boss Jia when he sold thousands of VCDs in Fusang market. As a result, many financial institutions have found it and immediately realized it. They all lamented that boss Jia is worthy of the God of management, story, finance and game. Only boss Jia can invent such awesome financial products!

For a while, financial products such as sub-prime funds swept the whole financial industry. Countless rich people and investors felt that they had found a good business of making a steady profit and investing in financial management. After all, the price of houses can't fall, which is impossible!!

As soon as these sub-prime funds are launched, they will be snapped up by a large number of investors.

As long as you dare to sell, I dare to buy it immediately. In an instant, all financial institutions are making a lot of money, and everyone's faces are full of beautiful smiles.

However, there are so many loans from various lending institutions. Soon all the loans were sold in the form of sub-prime funds, so many people who still want to sell sub-prime funds scratch their ears and cheeks.

So their heads suddenly lit up. Since subprime loans can be packaged into subprime funds, why can't subprime funds be packaged again and become subprime funds!

Well, there is no such saying as sub-prime funds. No matter how many times they are sub-prime, they are called sub-prime funds, and many investors don't care so much. When they see sub-prime funds, their instinctive reaction is to make money and have a pleasant annualized rate of return, so they buy them madly.

In the craziest 2006, some loans were even packaged and sold five or six times, that is, layer by layer, constantly deriving new financial products, just like cabbage.

At the financial conference on Wall Street, countless leaders touted this as the greatest financial product in the world and the greatest financial innovation in the world. This is the American dream. Only the United States can have such intelligent financial innovation, so that countless poor people can become local tyrants with houses overnight and make countless local tyrants more local tyrants.

Later, someone made statistics. Through these financial innovations, the output value of the U.S. financial industry increased by tens of trillions of dollars in a few years, more than the U.S. fiscal deficit.

Outsiders look very arrogant and worthy of being American, but anyone who calms down will find that the tens of trillions of dollars of financial products added out of thin air seem to be rootless trees and running water duckweed. It's OK on weekdays, but once the wind and rain blow, isn't it

This is the subprime mortgage crisis. It is conceivable that once such a huge financial plate collapses, it will be in terrible danger.

Some people are aware of this danger, some people are not aware of it, and those who are not aware of it will naturally be happy in it, while those who are aware of it feel that since they are aware of it, they must run faster than those who are not aware of it. At that time, they will run ahead with their money, and the losses are the property of other fools. They are happy!

The crisis began at the end of 2006. The rising house prices in the United States began to slow down at the end of the year, and prices did not rise in many areas. Of course, this is classified as a technical adjustment.

That is to say, just adjust it for the time being, and it will rise in the future.

The whole real estate industry has been rising for more than five consecutive years. Everyone believes that this adjustment is only temporary. By 2007, everything will rise again. No one realizes that this is the precursor of the beginning of a storm.

The first obvious hint of the crisis came from 2007, when new century finance corporation, American Residential Mortgage Investment Corporation and Bear Stearns bank successively declared bankruptcy.

The smart people who realized the risk began to want to run away, but they didn't know that they couldn't run away.