Recast youth

Chapter 996 The Origin of the Subprime Mortgage Crisis

Ye Feng knew who Wen Yueqi was talking about acting in the movie and becoming governor. Schwarzenegger in The Terminator became the governor of California in 2003.

In fact, Ye Feng knew that he was not just an American.

It can be said that people in any country are the same, and it will be the same in China ten years later. A large number of young people borrow money from various loan platforms with a drunken attitude today.

No matter how bad it is, you can still use it for early consumption such as Ant Huabei.

If you can't afford it, tear down the east wall to make up for the west wall. If you can't afford it again, it will be overdue.

As for banks rarely encounter such problems, that is because the Bank of China is different from the United States. The Bank of China is more cautious. It can be the icing on the cake, but it is impossible for them to provide help in the snow.

Of course, despite this, they still have a lot of dead ends.

Just imagine, even domestic banks that only provide icing on the cake will have a lot of bad debts, let alone financial lending institutions in the United States that even lend money to subprime credit lenders?
Ye Feng came back to his senses, looked at Wen Yueqi and asked: "Sister Qi, I roughly know the thoughts of these subprime credit lenders, but what about the loan companies, what are their thoughts? There are so many finance students in their company, really Don’t you see the potential risks inside?”

"I saw it." Wen Yueqi said with a smile.

Ye Feng asked in confusion: "Why is that?"

Ye Feng is indeed a little confused. Although the financial crisis broke out in the United States in 2008, and many lending institutions and Wall Street bankers ended in disastrous defeats, Ye Feng still does not think these bankers are stupid.

This can only mean that there are many reasons that he does not understand, such as the mortgage-backed securities packaged by the two giants Freddie Mac and Fannie Mae and sold to investors in the secondary market.

"Well, let me tell you slowly."

Wen Yueqi also collected a lot of information in the past few days. Seeing that Ye Feng wanted to know this, she slowly explained it to Ye Feng. She looked at Ye Feng and said, "Well, let me tell you about Wall Street lending institutions from the beginning. Maybe after I finish talking, you will have a more intuitive feeling."

"First of all, the United States is very developed. Almost 10 years ago, at that time, advertisements from loan companies appeared on TV, in newspapers, on the streets, or filled your mailbox with tempting flyers:"

"Do you want to live a middle-class life? Buy a house!"

"Is the savings not enough? Take a loan!"

"No income? Contact Aniu Loan Company!"

“Can’t afford the down payment? We offer zero down payment!”

"Worried that the interest rate is too high? We offer a preferential interest rate of 3% for the first two years!"

"Still can't pay every month? It doesn't matter. You only need to pay interest in the first 24 months, and the principal of the loan can be paid after two years! Think about it, you will definitely have found a job or been promoted to a manager in two years. , I’m still afraid that I won’t be able to afford it!” “Worried that you still won’t be able to pay it back in two years? Oh, you are really too careful. Look at how much the house price has increased compared to two years ago. When the time comes, you will sell it to someone else. , not only will you live in vain for two years, but you may also make a fortune! Besides, you don’t need to pay, so I believe you can do it. Do you dare not borrow if I dare to borrow? "

After saying this, Wen Yueqi paused, looked up at Ye Feng, and asked: "When you don't have a car, your colleague takes out a loan to buy a car. When you don't have a house to live in, your colleague takes out a loan to buy a house and lives a middle-class life. What will you do?" Do, can you withstand such temptation?"

"It's probably difficult. People are always trying to compare." Ye Feng thought for a while and said.

"Yes."

Wen Yueqi nodded: "It is also because of this temptation that countless American citizens did not hesitate to choose loans to buy houses. The example I cited is Aniu Loan Company. It is because of their attractive advertisements that in just a few short If all the money cannot be loaned out within a month, then if the money is loaned out, you must think about whether it can be recovered."

Wen Yueqi said while looking at Ye Feng: "As you said, the risk of lending to subprime credit lenders is very high. Aniu Loan Company also knows this truth, so he found several big names in the American economic circle. investment banks, including Goldman Sachs, Merrill Lynch, and Morgan..."

"No wonder, it turns out there are shadows of these top investment banks behind it."

Ye Feng sighed, even if he had never been to the United States in his previous life, he had heard the names Goldman Sachs, Merrill Lynch, and Morgan on the Internet countless times. They are the world's top investment banks, among which Goldman Sachs and Merrill Lynch are banks that focus on investment.

As for Morgan, who is more powerful, the name of this family often appears in novels. It once owned a quarter of the United States and promoted the establishment of the Federal Reserve. If the Rothschild family rose in the 18th century, then the Morgan family dominated 20th Century,

And JP Morgan, known as the "World's Creditor", also has a saying that has been passed down to this day: "It is not the law that drives history, but money, just money."

Very cool words.

Seeing that Ye Feng knew these investment banks, Wen Yueqi continued to talk.

Speaking of the bosses of Aniu Loan Company, after finding top investment banks such as Goldman Sachs, what do they do every day?Even if I am full, I am still idle, so I hired Nobel economists and Harvard professors, used the latest economic data models, and after some tinkering, I came up with several analysis reports to evaluate a certain stock. Is it worth buying? There is already a bubble in the stock market of a certain country. A group of people are cheating and drinking in the risk assessment market. Do you think they see any risks in this?
There is a risk, you can see it with your feet!

But there is profit, so why are you hesitating? Let’s take over!

So after economists and university professors used data models and other methods to evaluate, they repackaged it and came up with a new product - CDO (Note: Collateralized Debt Obligation). To put it bluntly, it is a bond. Through the issuance and Selling this CDO bond allows the bond holders to share the risk of the home loan.

If you just sell it like this, the risk is too high and no one will buy it. Assume that the original bond risk level is 6, which is medium to high.So the investment bank divided it into two parts: senior CDO and ordinary CDO. When a debt crisis occurs, senior CDO has the priority to pay compensation.In this way, the risk levels of the two parts become 4 and 8 respectively. The total risk remains unchanged, but the former is a medium-low risk bond. With the investment bank's "gold" tongue, of course it sold a lot of money!But what about the remaining high-risk bonds with risk level 8?

So the investment bank found a hedge fund, and who are hedge funds? These are the people who buy short and sell long in the financial world around the world. They live a life of licking blood. This kind of risk is trivial, so relying on old relationships , borrow money from banks with the lowest interest rates around the world, and then buy these ordinary CDO bonds in large quantities.

Wen Yueqi talked a lot in succession. At this point, she was afraid that Ye Feng could not digest it, so she paused and said to Ye Feng: "Before this, the central bank loan interest rate was only 1%, and the ordinary CDO interest rate may reach 5%, so just rely on Interest spread hedge funds are making a lot of money.”

(End of this chapter)