Presentation on theme: "HW check: Banking – the bare essentials (RB, p 26) 1 bank account 12 goes bust 2 cash 13 payments 3 in 14 debit 4 deposits 15 credit 5 interest (rate)"— Presentation transcript:
HW check: Banking – the bare essentials (RB, p 26) 1 bank account 12 goes bust 2 cash 13 payments 3 in 14 debit 4 deposits 15 credit 5 interest (rate) 16 transaction 6 loans 17 financial services 7 interest 18 foreign currency 8 depositors 19 securities 9 shortages 20 investments 10 borrow 21 payment system 11 central bank 22 cartels 23 regulators
HW check: → MK, p 74, task 2 charge i________do b_______ give a_______issue b______ issue s____ or s_____make l_____ offer a_____offer s________ pass l_____pay i_______ provide s_______raise c______ receive d______share p______ make l_____make p_____offer l_____ pay a d_____provide c____ provide l____
→ MK, p 74, task 2 charge interestdo business give adviceissue bonds issue stocks or sharesmake loans offer adviceoffer services pass lawspay interest provide servicesraise capital receive depositsshare profits make lawsmake profitsoffer loans pay a depositprovide capital provide loans
Crisis of Credit Vocabulary focus 1 subprime borrowers A failure to repay a loan 2 credit ratingB investment fund that combines safe & risky investments 3 default C clients who may not be able to repay their loans 4 hedge fund D assets you promise to give if you cannot repay a loan 5 security E estimates of people’s ability to fulfill their financial commitments 6 forecloseF to take possession of one’s property because they failed to continue paying a loan
Vocabulary focus 1 subprime borrowers C clients who may not be able to repay their loans 2 credit rating E estimates of people’s credit standing ability to fulfill their credit worthinessfinancial commitments 3 default A failure to repay a loan 4 hedge fund B investment fund that combines safe & risky investments 5 security D assets you promise to give to the lender if you cannot repay a loan 6 foreclose F to take possession of one’s property because they failed to continue paying a loan
SUBPRIME MELTDOWN (www.investopedia.com) ANTICIPATE THE ANSWER TO THE QUESTION AT THE END OF THE SENTENCE. Following the tech bubble and the events of September 11, the Federal Reserve stimulated a struggling economy …HOW?..by cutting interest rates to historically low levels. WHAT WAS THE RESULT ON THE HOUSING MARKET? As a result, a housing bull market was created. People with poor credit got in on the action when mortgage lenders created non-traditional mortgages.
Eventually, interest rates climbed back up… WHAT WAS THE CONSEQUENCE FOR BORROWERS? …and many subprime borrowers defaulted when their mortgages were reset to much higher monthly payments. This left mortgage lenders with property that was worth …HOW MUCH? …less than the loan value …DUE TO WHAT? …due to a weakening housing market. Defaults increased; the problem snowballed, and several lenders …WHAT HAPPENED TO THEM? …went bankrupt.
Investors and hedge funds also suffered because lenders sold mortgages they originated into …WHICH MARKET? …the secondary market. Here the mortgages were bundled together and sold to investors as collateralized debt obligations (CDOs) and other mortgage-backed securities (MBSs). When the higher risk underlying mortgages started to default, WHAT WERE INVESTORS AND HEDGE FUNDS LEFT WITH? …investors were left with properties that were quickly losing value. In the wake of the meltdown, …WHAT DID CENTRAL BANKS DO? …central banks released liquidity into the market place, which allowed struggling lenders and hedge funds to continue operations and make the necessary payments on their obligations.
WHICH WORD IS MISSING? Subprime meltdown is a financial crisis that ______ in the mortgage market after a sharp ________ in mortgage foreclosures, mainly subprime, collapsed numerous __________ lenders and hedge funds. The meltdown spilled over into the global credit market as ________ premiums increased rapidly and capital liquidity was _________. The sharp increase in foreclosures and the problems in the mortgage market were largely blamed on loose lending practices, _______ interest rates, a housing __________ and excessive risk taking by ________ and investors.
WHICH WORD IS MISSING? Subprime meltdown is a financial crisis that arose in the mortgage market after a sharp increase in mortgage foreclosures, mainly subprime, collapsed numerous mortgage lenders and hedge funds. The meltdown spilled over into the global credit market as risk premiums increased rapidly and capital liquidity was reduced. The sharp increase in foreclosures and the problems in the mortgage market were largely blamed on loose lending practices, low interest rates, a housing bubble and excessive risk taking by lenders and investors. http://www.investopedia.com/terms/s/subprime-meltdown.asp http://www.investopedia.com/terms/s/subprime-meltdown.asp HW : MK, p 75: The subprime crisis and the credit crunch Reading and exercises
MICROFINANCE - providing financial services to low-income clients Is that a good idea in your opinion? Have you heard of some specific examples? → MK, p 76 Listening Answer the questions.