Exam 5: Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

From the 1930s to the 1990s,________ banks primarily took deposits and made loans while ________ banks did security underwriting.

Beginning in September 2008 and extending into the spring of 2009,the world's credit markets- lending of all kinds- nearly stopped.The corporate lending markets demonstrated which of the following complex combination of crisis conditions?

The ________ was a contract,a derivative,which derived its value from the credit quality and performance of any specified asset.

Mortgage loans in the U.S.that meet the guarantee requirements for resale to Government Sponsored Enterprises and are conforming in every way are classified as ________.

The ________ eliminated tax deductibility on consumer loans,but allowed tax deductibility on interest charges associated with both a primary residence and a second mortgage loan.

________ is the process of turning an illiquid asset into a liquid salable asset.

A ________ is a derivative instrument created from bank-originated mortgages and loans,combined with similar debt obligations into a portfolio,and then re-sold through investment banking underwriters to a variety of investors.

Traditionally Alt-A mortgages have a default rate of less than ________ but those originated in 2006 now have a default rate in excess of ________.

In post-2000 U.S.debt markets,securitized assets took two major forms,________.

The TED spread is the difference between

The CDS was completely outside the regulatory boundaries,having obtained unique protection as a result of the Commodity Futures Modernization Act of 2000.The CDS was in fact a position or play which had been outlawed for more than a century.

Which of the following would be a good example of a structured investment vehicle (SIV)?

The central bank in most countries sets the rate it lends at,it does not dictate the rate at which banks lend either between themselves or to non-bank borrowers.

Many investing institutions had strict investment policy statements in place which required investment grade status (BBB and above)for purchase.Thus,there was additional pressure on rating agencies to give favorable ratings to CDOs.

Explain the process of securitization.In doing so be sure to define liquidity and the concept of originate-to-distribute and how the concept differs from traditional commercial bank lending.

To the best of your ability highlight the events from July 2007 through September 30,2008 that culminated with the 777 point fall in the DJIA.

In general,securitization tends to improve credit quality because loans are moved away from the original lenders.

Mortgage debt as a percentage of household disposable income continued to climb in the United States rapidly in the post-2000 business environment,and was a uniquely American,not global,issue.

In its purest form,________ essentially bypasses the traditional financial intermediaries, typically banks,to go directly to investors in the marketplace in order to raise funds.

The recession of 2007 - 2009 moved through three stages in the following order: