Vietnam national university of economics and business
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Khung-CTDT-TCNH-CLC, Ruot thang 4 (2)-99-102
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- 2.4. Impact of the crisis
2.3.2. Deep causesa. The bubble development of the real estate market There are three main factors that have started the real estate bubble market. First, starting in 2001, to help the economy out of stagnation, the U.S. Federal Reserve has repeatedly lowered interest rates, leading banks to also lower interest rates, leading banks to also lower interest rates on real estate loans (despite the types of home loan rates pressed by commercial banks). They are always much higher than the Fed's base rate, but their high or low levels always depend on the base rate. In mid-2000, the Fed's base rate was above 6%, but it was then repeatedly cut, until mid-2003 it was only 1%. Second, in terms of housing, the government's general policy at the time was to encourage and make it easier for the poor and groups of color to borrow money to buy a home. A Third, as stated above, because there is a transformation of loans into investment instruments, the credit market to serve the real estate market is no longer the only playground for commercial banks or companies specializing in real estate mortgage lending. It has become a new playground for investors, capable of mobilizing capital flows from all over the world, including foreign capital flows. The special feature here is that because the formation, trading, and mbs (backed securities) insurance is extremely complex, it takes place almost beyond the normal control of the government. Because of the lack of necessary control, greed and risk-taking have become common among investors. Besides, because it is possible to resell the majority of loans for other companies to turn them into MBS (mortgage-backed securities), commercial banks have become more adventurous than lending, despite the borrower's ability to repay. With three reasons, in the estate market, it is very bustling. There are many people who earn low income or do not have good credit but still rush to buy a house. In order to be able to get a loan, this group of people usually have to pay a higher interest rate and are usually loaned in the form of an adjusted interest rate over time (for example, if the agreement is to be borrowed at an interest rate of 6% and adjusted after 3 years then exactly 3 years later the interest rate is fixed according to that time). In short, this group of people belongs to the component of being loaned at a subprime rate. b. Securitization of real estate credits Since the 1980s, U.S. and international financial markets have rapidly developed derivatives and expanded their securities operations to finance debt and investments. In essence, securitization is a process of raising capital by using the assets available on the balance sheet as assets. ensuring the issuance of owed securities. In other words, securitization is the process of issuing debt securities on a guaranteed basis by the future cash flow that will be obtained from an existing group of financial assets. Therefore, investors who buy debt securities take risks related to the portfolio of secured assets that are brought to securitization. Although these new debt instruments help increase financing and disperse risk, they have led to the price of stocks and bonds moving away from the real value of the collateral. On the contrary, with the far-reaching transformation of the internal market, the requirements of the law on transparency and inspection and supervision capacity of state agencies have not caught up. No state agency, auditing or financial credit analysis unit has enough information and gloating through the layer of securities manipulation can accurately assess the value and risk of investments and assets on the books of financial institutions and banks. In addition, securitization activities are masked by the speculative activities of investment funds holding up to nearly $3 trillion in assets. In addition, securitization activities are covered up through the speculative activities of investment funds that hold nearly $3 trillion in assets but do not have to disclose assets to the public and are almost unsupervised by any state agency. Securitization and the introduction of products of this process such as collateral-backed securities (MBS), asset-backed debt papers (CDO) and the like are a major invention of financial instruments that exist no less risky. Once a breakdown in the asset market bubble occurs, these risks will cause a tremendous loss of trust of the parties involved. In addition, the practice of interbank lending will cause credit losses to spread throughout the banking system; A bankrupt bank would lead to many other banks going bankrupt. The loss of trust in the depositor causes a surge in deposit withdrawals that also makes the situation more serious and faster. c. The loosening of state management and mistakes in the economic policy of the state After the 1929-1933 World Economic Crisis, economic theories promoting the role of market self-regulation, the regulation of the "invisible hand" was criticized, Keynes's economic doctrine promoting the role of regulation of the state in the market economy was born. The coordination mechanism between market regulation and state regulation has helped the world market economy develop relatively stable over the past 60 years (overcoming, reducing the scale and destruction of cyclical economic crises). But in the 1980s, the Neoliberal school of economics was highly regarded. In the context of implementing economic liberalization policies, the Government has been implementing monetary easing for a long time. To revive the U.S. economy after the 2001 recession, the Federal Reserve has repeatedly reduced the interbank interest rate (from 6.5% to 1.75%). accordingly, the lending interest rate of huws-grade credit also decreased to low. Monetary easing (cheap dollar policy) has stimulated people to borrow money to buy houses and credit institutions are willing to lend venture capital. In short, the loosening of state management and mistakes in the state's economic policy are the deeper causes of the crisis. The U.S. market economy is based primarily on private ownership, profits are a powerful motivator of dynamic businesses, but also the cause of driving speculative businesses, even willingness to break the law, violate social ethical standards, and breaking the balance maintains the stable development of the economy, leading to the crisis. 2.4. Impact of the crisistải về 195.42 Kb. Chia sẻ với bạn bè của bạn:
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