牽一髮動全身:探討貪婪與美國房市

Abstract

The recent worldwide meltdown can be traced back when Federal Reserve Bank tried to stimulate the economy with cheap monetary policy by lowering their Fed Fund rates back in 2001. From the impact we have seen, we can see how the rise and fall of United States home values can impact the national consumer confidence, the stock market, the Wall Street, and the world economy. During the housing boom, consumers were cashing out from their homes to satisfy their own needs; and banks were more than willing to lend their cash out to make more money without the proper due diligent that exposed them to higher risks. As soon as banks qualified their potential borrowers according to guidelines set by that of investors, banks were very willing to fund the loan since they do not need to service their own loans. This meant banks do not need to carry subsequent credit risks like it was traditionally. Fresh money will be flooding in immediately once loans were packaged out and sold to the secondary markets. Wall Street big money players then would bundle them as attractive high return bonds to investors worldwide whom are convinced of such “safe” investment since these securities were backed by the United State housing market. In order to hedge their risks on the possibility of these bonds starting to default and lose value, investment bankers then purchased credit-default swaps as safety nets. It is true that some bankers did take advantage of the lesser educated home loan applicants who are looking to fulfill their American dreams of owning homes. Greed and opportunity enabled mortgage bankers to take in applicants that traditionally would not qualify. However, loan applicants should be fully aware of their own financial situation and not to blame others for leaving the money on the table for grabs. The combination of poor due diligence and greed all contributed to one of the biggest financial debacle we faced today. In this thesis, we will be examine the different players in this vicious mortgage cycle and show how chasing after their own agenda help contribute to the current economic meltdown. As a result, the United States economy that used to be where the rest of the world centered their attentions on now has become the greatest scapegoat for the credit crunch everyone is suffering from.