Sub-Prime Credit Crisis Often associated with the ongoing sub-prime mortgage crisis, the sub-prime credit crisis is a financial disaster described by contracted liquidity in international credit markets triggered by companies, banks and investment firms who invested in sub-prime credit.

DEFINITIONS:
Sub-prime: Credit with higher risk characteristics, such as bankruptcy, or collection accounts.
Credit Crunch: A sudden reduction in the general availability of loans (credit), or a sudden increase in the cost of obtaining loans from banks.


Where did the 'Subprime Credit Crisis' come from?
There are many intricate and reoccurring reasons that the sub prime market collapsed. One known factor is the sustained period of inappropriate lending which led to losses for lending institutions. Essentially, the economy's strength at the time allowed for too much money to be lent out to inappropriate reciprocates who could not pay their debts back. This can be attributed to a number of factors including: homeowners unable to pay their mortgages, over-spending, poor judgment by borrowers, over-building, risky mortgage productions and so on.
Following this, institutions normally reduce the availability of credit by increasing interest rates therefore drawing money out of the economy and motivating a downward cycle.

WHAT THE EXPERT SAYS:
Visit Errol D'Souza's Blog

Need An Example?
Here is a graph of US HOUSE PRICE TRENDS in 2008:


external image _44235452_h_price_416.gif

When did it occur/begin?
The most commonly referred to "Credit Crisis" is the ongoing one based primarily in the United States. There have been many other cases of financial crisis in other places of the world but the mortgage crisis in the United States has been one of the largest. It began in the tail-end years of the 20th century but became most apparent in the year of 2007. This started with the burst of the "Housing Bubble" beginning in 2005-2006.


What are determinants in deciding which people qualify for market interest rates?
Things like income level, size of down payment, credit history, employment and many more. As you can imagine, lending on this scale would lead to... "The value of U.S. sub prime mortgages was estimated at $1.3 trillion as of March 2007 with over 7.5 million subprime mortgages outstanding"
[**//http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#cite_note-9//**]

Further explanation:

Image:Financial Leverage Profit Engine.png
Image:Financial Leverage Profit Engine.png

Statistics/Important Dates:

  • On July 19, 2007, the Dow Jones Industrial Average hit a record high, closing above 14,000 for the first time.
  • On August 15, 2007, the Dow dropped below 13,000
  • The much anticipated passage of the $700 billion bailout plan was struck down by the House of Representatives in a 228–205 vote on September 29, 2008
  • Despite congressional passage of historic bailout legislation, which was signed by President Bush on Saturday, Oct. 4, Dow Jones Index tumbled further when markets resumed trading on Oct. 6
  • Job losses in the financial sector were significant, with over 65,400 jobs lost in the United States as of September 2008

Chart Of Dow Jones Collapse:
external image SSEvsDOW.gif












How the government was effected:

Image:Deficits vs. Debt Increases - 2008.png
Image:Deficits vs. Debt Increases - 2008.png

















How Canada is Doing:

Since Canada has a much smaller economy than the United States, our country was not hit as hard with the crisis. We did not have a housing bubble collapse but we are indeed very much affected by the United States markets.

WHAT THE EXPERT SAYS:
Visit Kollapsnik's Blog


The Media's Portrayal of the Crisis: Current Articles To Read
New York Times:
http://www.nytimes.com/2008/11/14/business/14markets.html?_r=1&hp&oref=slogin
Globe And Mail: http://www.reportonbusiness.com/servlet/story/RTGAM.20081113.wflaherty1113/BNStory/Business/home
Toronto Star:
http://www.thestar.com/business/article/536103SAN
San Francisco Chronicle:
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/11/13/financial/f133156S95.DTL&tsp=1



A YouTube Video of the newly elected President of America, Barack Obama
and his plans to pull the US out of it's financial crisis


Want To See More Blogs From The Experts?
Visit
http://wordpress.com/tag/subprime-mortgage-crisis/

Bibliography:

Bloomberg. "Our Country is Sinking." Weblog post. SubPrimeCrunch. 11 Nov. 2008. 13 Nov. 2008
<http://www.subprimecrunch.com/2008/11/gms-skid-accelerates-as-credit-crisis.html>.

Butler, Brian. "What caused the credit crisis?" Weblog post. GloboTrends. 12 Nov. 2008. 13 Nov. 2008
<
http://blog.globotrends.com/?p=295>.

"Credit Card Bailout - Financial Situation of American Express." Subprime Blogger. 11 Nov. 2008. 13 Nov. 2008 <
http://www.subprimeblogger.com/?p=167>.

Caitlin Gardner, Michelle Beck, Mitch Houlahan & Rukshan De Silva//