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Subprime mortgages & predatory lending explode -.A mortgage that people can’t afford to pay back making it subprime.
Glass-Stegal Act is Repealed-Glass-Stegal provides more effective use of bank assets.
Hank Paulson becomes Secretary of Treasury - The Goldman Sachs stock plummeted when Hank became Secretary of Treasury.
Sales of CDOs by major investment banks - A CDO is derivative that is backed up by loans.
Housing Prices Plummet - The insurance companies covered the loans with credit default swaps. Subprime borrowers couldn’t sell for as much and the bank foreclosed many homes which caused neighboring homes to decease in price.
Changes in the securitization food chain - The securitization food chain is when home buyers get a loan from lenders and the lenders sell it to investment banks and the rating agencies falsey rate the loans to make it look like they are a lot better than they actually are.
Ratings Agencies are paid off to give high ratings to risky investments They are paid to give a AAA when it should actually be a BB, they to this to make quick money and to trick investors in buying a “good” loan.
Leverage ratios are lifted on banks - A leverage ratio is a financial measurement that looks at how much capital comes from loans.
Lehman Brothers goes bankrupt The government failed to see all of the subprime mortgages in banks.
Federal Government starts TARP Program - The tarp program helped put money back into failing banks.
Government takes over two major lenders - They took over Fannie Mae and Freddie Mac
)Government issues roughly 700 billion dollars in bailout money All of this money was taxpayer money and a lot of it went to the CEOs of the banks as a raise.
Multiple public retirement funds lost millions They lost millions because of the stock market crash.
AIG begins issuing more and more Credit default swaps - allows an investor to swap or their credit risk with a another investor.
Government bailouts begins with 30 billion dollar cash infusion when Bank of America purchases Merrill Lynch.
Executives use bailout money to pay their bonuses Executives use the 700 billion provided the the government to pay big bonuses that they don’t need.
Over 6 million foreclosures on homes occur- There are 6 million foreclosures because people struggled to pay back their loans.
The CEO's of all major investment banks, and the staff of the Federal Reserve are called in to the White House
Financial Lobbying Power continues to grow - In 2009 there were 13,714 lobbyists and there were 535 members of congress.
Banks pay back all of the money, but are not charged interest. Banks pay back all of the money with no interest because of the TARP program
SEC budget and manpower is severely reduced - This is significant because the SEC failed to see the poor and cheap loans.