2008 ECONOMIC CRISIS

Influence of the 2008 Economic Crisis on National Westminster Bank (NatWest UK)



Influence of the 2008 Economic Crisis on National Westminster Bank (NatWest UK)

Introduction

The crisis in the subprime (mortgage secondary), loan guarantees low (because signed by contractors with inadequate income or past delinquencies or bankruptcies) granted by investment banks, U.S. (banks asking that granted funding rates interest variables and increasing over time resulting in a risk compensation with the performance of loans), begins to manifest itself in 2006 to burst in 2008. The crisis reaches the point of no return when the Americans start to not repay investors more mortgages triggering a massive increase in foreclosures (1.7 million homes involved only in 2007).

The origin of this phenomenon, the dizzying growth of the U.S. housing market (peak 2004-2006), with the sharp rise in house prices and subsequent expansion of investment in the sector. This "bubble" speculative expanded hand in hand with the continuing appreciation of houses stretching to reach, through the steady increase in allocation of resources in the field, the permanent expansion of the market. The indebtedness of U.S. households in 2006 caused the explosion in asset prices, particularly of that real estate, the debt increased as the increased property values. The fall in prices in 2007 caused the explosion of the value of loans at higher levels to the consistency of the same value of housing. The families were more highly leveraged bet on the continued growth, ignoring the risk of a market reversal.

The explosion of the mortgage bubble was amplified by the fact that U.S. banks, in order to reduce exposure from these highly risky financial products, loans sold to third parties themselves through various financial instruments, with other products. In this way, banks unloaded on to others (often other banks, but also investors) that the risk in granting such loans. The securitization of subprime mortgages multiplied, often in yields that demanded a further surplus to those who resell the derivatives of secondary mortgage. These processes have made ??it infected the entire world financial system of these titles, at one point considered the crisis, with a pejorative term," toxic ".

The sharp devaluation of these instruments triggered very serious difficulties in some of the biggest American banks. Bear Sterns, Lehman Brothers and AIG were reduced to collapse and then made ??safe by the intervention of the Treasury U.S. in concert with the Fed. Banks also European, as the British Northern Rock (fifth lender English), and large financial institutions (the Swiss UBS, the Belgian Fortis, the Franco -Belgian Dexia -the latter two partially nationalized by the French, Belgian and Luxembourg - the German Hypo Real Estate and ' Italian Unicredit), were hit by the devaluation of real estate securities, or coming later nationalized or forced to recapitalize. After several months of weakness and loss of jobs, the phenomenon has collapsed between 2007 and 2008, causing the bankruptcy of banks and financial entities and causing a sharp drop in stock values ??and the ability of consumption and savings ...