Ra World crisis: what are the causes, consequences and forecasts? How did the phenomenon spread?

2008 crisis, which triggered the Great Recession, became the most serious global financial crisis since the US Great Depression of 1929.

Chronology of the 2008 crisis (Main dates):

The 2008 crisis began long before its climax in September 2008.

In 2006, the rise in prices for residential buildings in the United States stopped. Defaults on subprime mortgages began to rise. The first to suffer were mortgage lenders who issued risky loans.

May 5, 2006: Merit Financial bankruptcy. By the end of 2006, 10 such institutions went bankrupt. By March 2007 - fifty.

On April 2, 2007, the 2nd largest subprime lender New Century Financial went bankrupt, having lost its sources of financing.

May 2007: Ben Bernanke (Fed), speaking before Congress, acknowledged that the subprime loan market was facing many problems, but did not see this as the beginning of a pandemic and presented the situation as a local outbreak of financial disease.

Sources:
Nouriel Roubini, Stephen Mime: “Nouriel Roubini: How I Predicted the Crisis”

The article is incomplete. Please complement - write comments.

Hello, dear readers! Ruslan Miftakhov is pleased to welcome you, and today we will look at one of the most global economic events of recent times - the mortgage crisis of 2008 in the United States, the consequences of which still affect the economic situation in the world.

Have you ever wondered what the cause of the global crisis that occurred back in 2008 was? Well, everyone knows the crisis and the crisis, everyone has heard, but what exactly and why it happened, few people thought about it or simply did not understand.

Therefore, I decided to consider the causes and consequences of this crisis in order to understand whether Russia faces the same scenario, in the current conditions of rising dollar prices, because almost everyone has heard about the problems of repaying foreign currency loans in our country.

The main reason for the emergence of problems in the field of mortgage lending in the United States is the decline in real estate prices and an irresponsible approach to mortgage lending.

It all started with the fact that over the five years before this event, the value of real estate was steadily increasing, and mortgage lending became very profitable, which contributed to the development "non-standard" loans.

“Non-standard” are loans that are issued according to simplified requirements for borrowers, thereby carrying a great risk for lenders. Moreover, they were issued mainly not by banks, but by various mortgage companies, which, not having their own capital, took it through short-term bank loans to finance their activities.

If initially such companies simply lowered their rates in a competitive environment, then they began to lower their demands even further. And by 2006, the share of such low-quality loans became equal to 20% of all mortgages.

This led to the fact that the clients of American mortgage companies were mainly unscrupulous, low-income speculators, and when they stopped paying off their debts, the companies, in order to get out of this situation, had to sell mortgages to investors not only from the United States, but throughout the world.

When in 2007 the value of real estate in the United States fell sharply, and naturally became lower than the purchased mortgages, all investors suffered enormous losses, which affected the economies of many countries.

What are its consequences and impact on the global economy?

All participants in substandard loans, and the largest systemically important US banks, became bankrupt. Despite the measures taken by the American government (mortgage companies were nationalized, loan rates decreased by 0.5%), overdue debt amounted to $98 billion. This also provoked a crisis of world banks.

Borrowers who, due to an 8-12% rise in real estate prices, became insolvent, had to leave their houses to the banks. And there were about 100 thousand such families.

In addition to serious difficulties within the United States, the crisis had an impact on the economy around the world. Almost all stock exchanges collapsed. The S&P 500 index fell 30% (a list of America's largest companies with the highest capitalization), the MSCI World index of developed countries fell 32.3%, and the emerging markets index fell 40.5%.

Based on this data, stock markets around the world have suffered even more than the United States. And the main reason for this is that the whole world is tied to the American dollar, which is the equivalent of trade. And if problems have overtaken America, they will spread further.

Watch a short video that briefly explains the entire financial fraud scheme. We all know very well what this all led to.

To briefly describe the state of the US economy, it can be compared to a black hole that needs more and more outside investors to cover its debts. Since 2005, Americans' savings have been negative. This country consumes about 35% of world goods, but produces only 20%, and the external federal debt is increasing.

Now employment in the United States, due to the transfer of jobs to China and developing countries, is rapidly declining. Also, the country’s economy is greatly influenced by the huge expenditures on various military actions, which contribute to the outflow of funds from the budget.

After the crisis in 2008, banks changed their attitude towards mortgages. Interest rates have been raised, borrowers are scrutinized much more strictly, and virtually all no-down payment programs have been cancelled.

Who made money from the crisis?

In 2007, Queens John Paulson, a native of New York, brought his investment fund, called Paulson & Co, $3.7 billion, ahead of D. Soros, who received $2.9 billion, and D. Simonas, $2.8 billion. .

Paulson previously partnered with Leon Levy and J. Nash, both Wall Street legends. In 1994, he opened his own investment company, which was not doing so well - in 2002 it had only $500 million.

And only in 2007, the volume of investments grew to $28 billion, and information about most investors is hidden. Investors' contribution to Paulson's success is enormous, but one cannot take away his intelligence and willingness to go against the grain.

Isn't Russia facing such a crisis?

Domestic experts consider the American scenario to be unlikely for our country. And there are several reasons for this:

1. Mortgage lending is a relatively new product for us (it began to develop less than 10 years ago).
2. Our banks provide loans with their own assets, and more carefully assess the risks associated with non-repayment of funds.
3. Our housing continues to grow, and there are very few companies that can issue non-standard loans.
4. The Central Bank of Russia monitors the development of mortgage lending and makes them unprofitable for banks.

Now the share of foreign currency loans on mortgages is 3.5%, and our authorities are busy with this problem. Therefore, we have hopes of solving this problem as well.

Thus, our economy, as well as the world economy in general, has been and is being strongly influenced by America, where the mortgage crisis affected the whole world.

But he taught many financial institutions to approach lending, investing, and economic factors in general responsibly. And given the situation in Russia, we can rest assured that such a crisis will not happen here.

By the way, there is a film on this topic, if you haven’t seen it, it’s called “The Big Short”.

This brings us to the end of today's topic, which I hope you found interesting! We tried very hard, and we will count on your positive ratings and comments!

Have a great day everyone and see you soon!

Best regards, Ruslan Miftakhov.

US mortgage crisis 2007–2008 – collapse of the real estate market and related derivative securities. In terms of the level of decline, the crisis is compared to the “Great Depression” of the 30s of the last century; only financial intervention and strict regulatory measures by the federal authorities prevented the final collapse of the banking system.

Mortgage crisis in the USA 2007-2008 subprime mortgage crisis) - the collapse of the real estate market due to a sharp increase in delinquencies/non-payments on high-risk mortgage loans and massive alienation of real estate in favor of creditors. Depreciated mortgage-backed securities led to the strongest drop in stock exchange activity since the Great Depression, mass bankruptcy of investment banks and insurance companies around the world, which led to the beginning of a global crisis, the consequences of which have not been overcome to this day.

If we compare the mortgage crisis with the collapse of the American economy in the period 1929-1939, then two common features are clearly visible:

• speculative actions in the banking and stock exchange sectors;
• belated reaction of state regulatory authorities to the growth of crisis phenomena in the economy.

In 2011 One of the world's largest investors, Warren Buffett, testifying before the Commission of Inquiry into the Causes of the Crisis, said that “this was the largest speculative market bubble I have ever seen. All of America has convinced itself that the rise in real estate prices will continue forever and will never fall.”

Causes of crisis phenomena

There are many theories about how and why the real estate market has turned from a “safe haven” into a source of fraudulent speculation, depending on who the author is: bankers see this solely as regulatory failures, and government officials blame the private sector for inflating the “bubble.” arrived. But there are reasons for the mortgage crisis in the United States that are mentioned in almost all studies, namely:

Growth of foreign investment in the US economy

In the period from 2002 to 2005, there was a sharp increase in foreign capital and working capital injections, primarily due to oil exporting countries and rapidly developing countries in Asia, primarily China. There are two theories to explain this fact:

• At the end of 2004, the US balance of payments deficit was 5.8% of GDP due to the excess of imports of goods and services over exports. In this case, the trade balance is most quickly brought into balance precisely by the influx of external capital. The point of view that it was excess global capital that provoked the mortgage crisis was defended by then Fed Chairman Ben Bernanke.
• Capital was attracted precisely by the high level of consumption in the United States, which, when exports fall, must be satisfied by “loans” from a foreign manufacturer or investor.

Regardless of which of the two theories is correct, by 2005-2006 there was a huge amount of free capital in the United States. It was necessary to find a more profitable, but at the same time reliable investment than simply buying Treasury bonds.

Real estate seemed a logical choice in this situation, especially since for several decades one of the main directions of American domestic policy was to increase the number of private homeowners. In 1995, the two largest US mortgage agencies, Fannie Mae and Freddie Mae, received tax breaks to stimulate loans to low-income borrowers, and the market was already ready to accept additional financial injections.

Changes in legislative regulation of the banking system

Commercial banks were active participants in the constant inflation of securities prices during the Depression, using depositors' money for this, which ultimately led to the Black Tuesday stock market crash. To prevent similar situations in the future, the Glass-Steagall Act was passed in the fall of 1929, clearly dividing banks into commercial and investment. Commercial banks were prohibited from trading in securities, including through branches or subsidiaries, and mandatory insurance of deposits was introduced.

The volume of free capital in the US market was huge (according to various estimates from $50 to $70 trillion), which made it impossible to place it between investment banks operating at that time and their clients. Commercial banks also wanted a share of the profits, especially after the passage of the Alternative Mortgage Transaction Parity Act (AMTPA) in 1982, which allowed the issuance of mortgage loans to lending institutions that were not federal banks.

A decades-long lobbying campaign by major banking players led to the Gram-Leach-Bliley Act, or Modernization Act, which repealed the Glass-Steagall Act and thus changed the entire banking system. Banks were able to create financial holding companies that could simultaneously engage in commercial, investment and insurance activities. At the same time, the rights of government regulators and supervisory authorities were significantly limited.

Subprime lending

For US banking practice, 6-8% of the total mortgage portfolio has traditionally been considered an acceptable level of high-risk loans. But to cover the beginning of the construction boom, such a percentage of unreliable borrowers turned out to be too low and banks began to gradually reduce mandatory requirements. Such loans are called substandard and many modifications have been developed:

• with floating interest rate(interest-only mortgage) - during a certain initial period of the loan, only interest is paid, and not the principal amount of the debt. By the beginning of the crisis, more than 90% of loans had a floating rate;
• client choice of payment option(“payment option” loan) - you can choose the size of the monthly installment, while the unpaid interest could be added to the principal amount of the loan. Almost every tenth loan in the period 2005-2006 was structured in this way;
• the possibility of repaying most of the debt at the end of the contract (balloon-payment mortgage) and other options.

The apotheosis of the fight for a client at any cost was loans with the presence of assets (funds in a bank account), but without regular income (income, verified assets, NIVA), and loans without any assets or income at all (no income, no assets, NINA).

Risky securitization and manipulation of ratings

Banks were well aware that the probability of non-repayment of loans issued was excessively high, and therefore they tried to minimize the level of risk. This is typically done through securitization, where multiple mortgages or other financial instruments are combined into one derivative security, which is then sold to a third-party investor.

Due to the fact that the derivative includes several low-risk assets, their value will never fall to zero or it will be possible to use a guarantee in case of default, as government mortgage agencies did in the early 80s of the last century, when only a modern securitization model was developed.

Mortgage-Backed Securitie (MBS) and Collateralized Debt Obligations (CDO) issued on their basis have the most bizarre forms: a package of risky loans is “diluted” with a small number of reliable ones to increase their rating, MBS consisting of only from “toxic” loans. Synthetic CDOs are emerging, which are derivatives of another CDO. This whole mass of new securities, which are almost impossible for a simple investor to understand, is thrown onto the stock market to generate additional income.

Speculative private, insurance and stock investments

The mortgage crisis in the United States could never have reached such proportions without the support of stock market speculators, who saw in MBS and CDO securities a source of what seemed to them to be endless profits. The natural collapse was provoked by the following three main factors:

• Mortgage securities ceased to be associated with specific real estate objects and began to live their own separate “life”. Endless issues and the emergence of new options, such as “CDO on CDO,” only encouraged traders to continue speculation, and no one was interested in the statistics of an increase in the actual number of defaulters.
• The same forecasting and analysis models were applied to mortgage-backed securities as for ordinary stocks and futures, although these are radically different instruments. Methods for stock exchange assessment of mortgage risks had not yet been developed; the securities did not have a long historical period sufficient to test trading strategies and hypotheses.
• In order to squeeze out maximum income, banks and large hedge funds colluded with the leading rating agencies Standard & Poor’s and Moody’s, which, as the Commission of Investigation later revealed, deliberately overstated the investment attractiveness of even the most “junk” bonds and mortgages. In fact, these agencies did not evaluate the securities at all - they simply put on the securities the price offered by the issuers.

The imperfections of current legislation allowed banks to increase the volume of derivative securities, nominally complying with the requirements for the ratio of equity and borrowed capital. Using various off-balance sheet schemes, huge sums were transferred to hedge funds and other non-state credit organizations, that is, a “shadow” banking system was actually created. Before the US subprime crisis began, the net income of the financial sector amounted to almost 27% of GDP, and most of this money remained off the balance sheet. Thus, even the process of maintaining the current activities and liquidity of leading banks has become directly dependent on the situation in the real estate market.

Ordinary citizens also joined the race - historically, the growth in real estate prices was close to the inflation rate, but in 2000-2006 real estate showed almost double growth. A house is no longer a long-term, low-return investment. Even borrowers who met all the conditions of Federal programs began to prefer subprime loans to obtain a secondary mortgage loan at an increase in value. That is, when an additional credit limit appeared, the borrower could either take out another mortgage loan, or spend this amount on consumption, or simply receive this amount in cash at the bank. If we add to this a sharp increase in consumption levels, a decrease in personal savings and real wages, the mortgage collapse became inevitable.

Consequences of the crisis

Despite all the measures to restructure the mortgages of insolvent borrowers, by mid-2011, over a million residential properties had been completely alienated, with almost no market activity. By 2014, the share of loans for which payments were not made dropped to 8%, but negative processes could not be completely abandoned.

Implications for the US economy:

• Of the five largest US mortgage banks, Lehman Brothers (inability to cover credit default swaps) and Bear Stearns (losses of subsidiary hedge funds) went bankrupt, Merrill Lynch and Bank of America merged, and Goldman Sachs and Morgan Stanley ceased investment activities in exchange for Fed support.
• The value of production assets decreased by more than 20% during the period June 2007-November 2008.
• The leading stock index S&P500 fell by more than 45% in November 2008 compared to the same period the previous year.

• The real estate market has lost more than $5 trillion since its all-time high in 2006. and still shows no growth;
• Private savings and pension savings of US citizens decreased by $2.5 billion, and taking into account the alienation of property and forced foreclosures, the total amount of personal losses is almost $8 trillion;
• The crisis has affected all sectors of the economy, especially the automotive industry and the service sector.

Measures to overcome the consequences of the crisis

An investigation into the causes of the 2008 mortgage crisis in the United States showed that active government action began only in September, although the first signs of instability in the financial system appeared already in the second half of 2007 and time was lost to mitigate the consequences. In addition, not a single claim for administrative or criminal liability was brought against any of the financial organizations that “stimulated” the development of the crisis and speculated on its consequences.

Government actions

Buying out problematic substandard assets from banks and insurance companies at the expense of the US budget was the only way to quickly maintain liquidity and avoid the final stagnation of the economy and the bankruptcy of a company like Lehman Brothers. In August 2008, Congress passed the Emergency Economic Stabilization Act of 2008 (EESA) or the “Paulson Plan” after the then Secretary of the Treasury. The total amount of injections into the private sector, along with tax breaks, amounted to $700 billion. which were not returned. That is, in fact, the banks covered their risky actions at the expense of taxpayers.

Borrowers received a refund of part of the property taxes paid, but this did not lead to a significant improvement in the situation. In addition, a government program was implemented to provide individual monetary assistance to insolvent homeowners, as well as assistance in reaching an agreement with the largest banks and mortgage lending agencies Fannie Mae and Freddie Mac to introduce a moratorium on foreclosures and increase refinancing programs.

Actions of the US Federal Reserve

Together with the central banks of leading countries in Europe and Asia, interest rates were reduced, which only confirms the global nature of the crisis. The positive effect of this step was minimal.

Short-term loans were issued at a reduced rate for banks controlled by the Federal Reserve, and an additional (to Paulson's plan) repurchase of problematic mortgage securities was also implemented.

Constant control of the guaranteed dollar collateral of international currency swaps of the ECB banks, the Banks of England and Switzerland has been implemented.

A program has been provided for providing targeted loans, including to non-bank credit institutions, for the issuance of mortgage-backed securities with guaranteed collateral (Term Asset-Backed Securities Loan Facility, TALF).

Implications for the global economy:

The peak number of evictions for non-payment of mortgages occurred in 2009-2010. The inability to repay subprime loans and related securities led to huge losses throughout the global banking system: the largest (as of 2008) global bank HSBS alone lost more than $10.5 billion. In April 2008, the IMF estimated total global losses from the mortgage crisis in the US at approximately $1 trillion, then a year later revised this value to $4 trillion.

US expenses to overcome the consequences of the crisis at the end of 2009 were estimated at $11 trillion, but approximately 50% of them should be assessed not as direct expenses, but as investments, loan guarantees, repurchase of financial assets (mortgage and commercial paper secured by collateral) , including in order to increase market liquidity.

The echo of the crisis is still felt today. The collapse of the American stock market led to panic among investors and a redirection of cash flows into less risky assets, in particular, commodity futures, which gave rise to a global food crisis and rising oil prices.

In 2008, a financial and economic crisis began in the world, which manifested itself in the form of a strong decline in key economic indicators in most countries with developed economies, which subsequently developed into a global recession (slowdown) of the economy.

The emergence of the crisis is associated with a number of factors: the general cyclical nature of economic development; overheating of the credit market and the resulting mortgage crisis; high prices for raw materials (including oil); overheating of the stock market.
The precursor to the 2008 financial crisis was the US subprime mortgage crisis, which affected subprime mortgages in early 2007. The second wave of the mortgage crisis occurred in 2008, spreading to the standard segment, where loans issued by banks are refinanced by state mortgage corporations.

Immediately after the United States, the European economy was severely affected by the financial crisis.

Iceland survived the onset of the global financial crisis more difficult than other European countries and in 2008 found itself on the verge of bankruptcy. Iceland's three largest banks - Kaupthing, Landsbanki and Glitnir - collapsed. The country's authorities were forced to nationalize these banks and also seek financial assistance from the International Monetary Fund (IMF). As a result, Iceland became the first Western country since 1976 to receive an IMF loan ($2.1 billion). Amid mass protests, the government was forced to resign. The country's economy slid into recession for more than a year and was able to emerge from it only in the third quarter of 2010.

In the UK, the first step towards de facto nationalization of the big banks was taken in October 2008, when the government recapitalized Royal Bank of Scotland and Lloyds with $62 billion in exchange for large stakes in the banks. Earlier, in September, two small banks were nationalized - Northern Rock and Bradford & Bingley. By March 2009, half of the country's banking system was already under government control.

In Germany, the first company included in the most important German stock index DAX, which as a result of the global financial crisis, was the Munich-based Hypo Real Estate, a leading German bank operating in the real estate market. Initially, the bank was allocated assistance of 35 billion euros under government guarantees, but this amount was not enough. To prevent HRE from going bankrupt, the German stabilization fund SoFFin offered to buy out depreciated shares from the bank's shareholders and by May 2009 it managed to acquire 47.3% of the shares.

The German government provided a total amount of about 500 billion euros, which, by the end of 2009, assumed not only state guarantees of interbank loans, but also direct financial injections to increase banks' own capital. To finance the anti-crisis package, a stabilization fund in the amount of 400 billion euros was created.
The French government spent 10.5 billion euros in support of the country's banking system in the context of the global financial crisis in October 2008. Among the banks that received the loan are Credit Agricole, BNP Paribas and Societe Generale.

Against the backdrop of globalization, the crisis has spread to all regions of the world.

In early December 2008, the Bank of Canada lowered its refinancing rate to its lowest level since 1958 and admitted that the country's economy had entered a recession. The Canadian government has created a special $3 billion fund to stimulate the economy amid the crisis.

In Japan, the deterioration of all economic indicators began in the second quarter of 2008; at the end of November 2008, the statistical agency of the Japanese government officially recorded a recession. For July-September, the decline in GDP amounted to 0.4% (annualized), according to official data updated in early December - by 0.5% compared to the previous quarter; on an annualized basis, the country's economic growth rate decreased by 1.8%.

Emergency assistance to banking sector companies from the state in some EU countries subsequently became one of the causes of the sovereign debt crisis in 2010.
The first victims of the crisis among Russian banks in September 2008 were KIT Finance and Svyaz-Bank. To repay debts to counterparties Gazprombank in the amount of 22.5 billion rubles. In September 2008, Svyaz-Bank to Vnesheconombank.

VTB Bank, along with other Russian banks, received government support. At the height of the crisis, a 10-year subordinated loan from VEB was attracted for 200 billion rubles. Then, about a year later - in the fall of 2009 - VTB placed an additional issue, which was almost entirely worth 180 billion rubles. In addition, VTB attracted funds from the Bank of Russia on collateral and at unsecured auctions.

The crisis quickly spread to the real sector of the economy. The capitalization of Russian companies decreased by three quarters in September-November 2008; gold and foreign exchange reserves decreased by 25%. The financial crisis reduced public confidence in banks and led to an outflow of deposits. In September 2008, personal account balances in the 50 largest Russian banks decreased by 54 billion rubles, which amounted to 1.2% of the total. The flight of depositors from the banking system reduced the financial stability of banks, which led to the bankruptcy of several large investment and commercial banks.

Many companies were in a pre-bankruptcy state. Layoffs of workers began, sending them on administrative leave, reducing wage rates.

Also, the financial crisis provoked a fall in oil prices. There have been problems with investment in this sector, and there is also a risk of a slowdown in the implementation of projects to increase production and build energy pipelines. There was a reduction in the growth rate of the Russian economy. For example, while the economy grew by 8.7% in 2007, for 9 months of 2008 the growth was 4.9% compared to the corresponding period of the previous year. 2008 was the last year of growth in the working-age population. As a result of the financial crisis, there was a reduction in government projects in infrastructure and construction.

In the global economy. At the G20 financial meeting in July 2013, finance ministers acknowledged that both a slowdown in growth in some large emerging economies and a recession in the eurozone continued. The global economic recovery remains fragile and uneven, and unemployment remains high in many countries.

International organizations for the development of the world economy are in the direction of deterioration. In July 2013, the International Monetary Fund (IMF) downgraded its forecast for global economic growth in 2013 to 3.1% from 3.3% expected in April, and in 2014 to 3.8% from 4%. The forecast for growth of the US economy, the largest in the world, for the current year was reduced to 1.7% from 1.9%, for 2014 - to 2.7% from 2.9%. The eurozone economy in 2013 will shrink, according to fund analysts, by 0.6% (worse than the 0.8% decline expected in April). Next year, the region could achieve economic growth of 0.9%.

Forecast for Russia's GDP growth in 2013 from 3.4% predicted in April, in 2014 - to 3.25% from 3.8%.

The global economic crisis of 2008 is a global decline in world economic indicators that began after the crisis in the real estate market and related securities in the United States. The consequences are still being felt, despite large-scale government support for the financial system in the United States and Europe.

The global economic crisis of 2008 is a decline in the economy that began in 2008, the consequences of which have not been fully overcome to this day. The beginning is considered to be a crisis in the US mortgage and stock markets, comparable in scale to the Great Depression of the 1930s. By 2009, global GDP was negative for the first time since the end of World War II.

Most financiers and politicians predicted the end of the crisis by 2009-2010, but as statistics show, its consequences continue to affect the global economy. At the beginning of 2016, the head of the ECB, Mario Draghi, and the managing director of the IMF, Christine Lagarthe, almost simultaneously noted in their forecasts low investment growth even with zero interest rates of central banks, high unemployment and a decline in living standards. All these factors indicate a continuation of the global recession.

Mortgage crisis in the USA

It is the fall of the real estate market and related securities that is considered to be the “start” of the global financial crisis. Two factors led to the disastrous result:

1. Reducing requirements for borrowers

In the United States, for a long time the volume of high-risk mortgage loans did not exceed 8%, but from 2004 to 2006 it increased to 20% (and in some regions even higher). The growth was due to the following reasons:

• In the USA, loans usually cover 120-130% of the cost of real estate, while, for example, in Russia, a borrower can expect a maximum of 80-85%. For the bank, such a loan is initially unprofitable: in the event of alienation, it is almost impossible to return the full amount, especially with rising inflation.
• Providing loans to borrowers with a short credit history or no credit history at all. Such loans are called subprime, and their share of the total amount of unpaid obligations by 2008 was 25% of the total, and in California and Florida - up to 40%. Competition between banks led to the fact that the conditions for subprime loans were much more favorable than for conventional loans from government mortgage agencies. The most common: loans with a floating rate depending on the LIBOR value and with payment only of interest for a certain period.
• The constant rise in real estate prices and the ease of obtaining a loan have created a situation where the borrower considers real estate solely as an object for further resale or prolongation of a loan for a larger amount for a profit. The repayment procedure is not considered at all.

2. Speculation in mortgage-backed securities

The classic model provides that the bank provides a loan and bears all the associated risks. In the early 80s of the last century, a securitization procedure was developed - combining several low-risk loans into one derivative security (derivative) for sale to investors. The idea was initially used only by government agencies that provided investors with guarantees in the event of defaults on mortgages.

In the late 90s, private banks that had large volumes of issued loans began to carry out securitization. At that time, the peculiarities of American legislation did not provide for strict control for private companies, and the most popular new derivative was collateralized debt obligations (CDO), which were rated by leading rating agencies S&P 500 and Moody's as low-risk securities.

CDOs quickly became a popular tool for stock market speculation, and the constant growth of quotations required constant new issues. CDOs emerged, which were based on high-risk mortgages, but even such “junk” securities were in huge demand and the holdings of major investment banks such as Merrill Lynch amounted to billions of dollars. As it turned out during a subsequent investigation by the FBI and the Securities Commission, credit agencies assigned high ratings to obviously unprofitable CDO packages.

The rise in prices and the number of subprime loans naturally led to an increase in the volume of non-payments, which by 2008 had reached a critical level and the stock market could no longer support the artificially inflated CDO rate. The 2008 crisis has begun.

Declining oil prices

In April 2008, the historical maximum oil price was reached at $147/barrel. At the same time, there was an increase in the price of gold - the most far-sighted investors had already begun to understand that this would be followed by a sharp decline. The price of a barrel fell in October to $61, and in November decreased by another $10. The main reason for the fall was the decline in consumption in the US due to the mortgage crisis.

Development of the crisis

US President Ronald Reagan's campaign slogan was to cut taxes, especially on wealthy Americans, while maintaining spending levels, which his team believed would spark an increase in investment and economic activity. The following presidents, George HW Bush and Bill Clinton, continued this policy, which ultimately had the opposite effect. The greatest growth was observed outside the industrial and service sectors, and by the beginning of the crisis, the largest investments and profits came from financial institutions and the real estate market, which inevitably led to the effect of a “bursting bubble.”

After the adoption by the US Congress on October 3, 2008 of a plan of measures to overcome the crisis proposed by Treasury Secretary Henry Paulson, the stock market began to collapse: the American S&P500 stock index lost 30%, the Dow Jones industrial average fell by 11.08%.

Unlike 2000-2002, when the stock market experienced a shock due to the massive bankruptcy of overvalued companies in the IT sector, the current recession has spread beyond the United States and has become global in nature, affecting the foreign exchange and commodity markets.

The bankruptcy of American investment banks

Five leading US banks in the mortgage lending industry have gone bankrupt or gone out of business:

• Bear Stearns. The fifth largest and first bankrupt, which lost almost all of its investors' money as a result of the activities of its hedge funds, received refinancing from the US Federal Reserve and JPMorgan Chase, which caused a 47% drop in shares and panic in the market.
• Lehman Brothers. The largest US banks with more than a century of history were forced to declare bankruptcy after failing to pay clients credit swap (insurance) on depreciated mortgage derivatives.
• Merrill Lynch. The bank with the most developed network of financial advisors and one of the largest packages of “problem” mortgage securities. Purchased by Bank of America;
• Goldman SachsAndMorgan Stanley. They survived in exchange for covering losses with Fed funds and ceasing investment activities.

Problems affected not only the banking sector - the largest mortgage agencies Fannie Mae and Freddie Mae came under the control of the US Federal Housing Finance Agency, the second largest insurance company AIG was restructured thanks to government loans.

Actions to overcome the crisis

The most radical measures were taken in the United States, as the country most affected by the crisis. Only the first tranche of the Fed to stabilize the financial system amounted to $250 billion in exchange for the partial nationalization of banks and companies; by December 2010, the total amount of injections into the economy amounted to almost $1 trillion. Among the world events after the onset of the 2008 crisis, we briefly highlight the following:

• Simultaneous reduction of interest rates on October 8 by leading central banks, with the exception of the Bank of Russia and the Central Bank of Japan. This decision was regarded as recognition of the global nature of the crisis. The next day, interest rates were cut in South Korea, Taiwan and Hong Kong. On December 4, the ECB and the Bank of England made a second cut to prevent deflation.
• Guarantees from the ECB, the Bank of England and the Central Bank of Switzerland provided the US Federal Reserve with the necessary dollar collateral under currency swap agreements, which helped maintain the liquidity of international payments.
• Two G20 summits on November 14, 2008 and April 2, 2009 made the necessary decisions on reforming international financial institutions, limiting protectionist measures, and significantly increasing the resources of the World Bank and the IMF.

Consequences of the crisis

According to the Washington Institute of International Finance, for the period 2007 - the first half of 2008, the losses of the global banking system amounted to about $390 billion, and more than half of them occurred in the Eurozone. The capitalization of American companies fell by an average of 30-40%, European ones by 40-50%. The volume of world trade decreased by 10%, which has still not recovered to pre-crisis values.

Measures to reduce the consequences of the crisis in the form of reducing spending by member countries and tightening the rules of interbank lending were taken by the ECB with a significant delay. This did not prevent the decline of the Eurozone economy, which accounted for 30% of the world's economy as of 2005-2009. In December, the fall in total industrial production was 11.5% - a record since the introduction of pan-European statistics in 1986.

Economic crisis of 2008 in Russia

The first crisis phenomena in the Russian economy appeared in February 2008, when the Bank of Russia recognized the existence of problems with liquidity. The current economic situation was characterized by a large volume of external corporate borrowing against the background of a decrease in public debt and an increase in the gold and foreign exchange reserves to the third in the world.

The growth of investment and lending, which began after the 1998 crisis, continued, and this, according to the Ministry of Finance of the Russian Federation and the IMF, led to the “overheating” of the economy, and by April 2008. inflation growth was 14%.

Among the external causes of the 2008 crisis in Russia, two main ones can be distinguished:

• A long-term increase in the LIBOR interest rate in the United States in the period 2002-2008 against the backdrop of a depreciating dollar, which ceased to be a stable reserve currency. This caused a massive transfer of dollar assets into other currencies such as the Japanese yen, real estate and gold.
• Problems in the foreign policy of the Russian Federation: disagreements with Europe over the activities of joint energy companies and an ambiguous reaction to the August Georgian-Ossetian conflict. The result is an outflow of foreign capital and a fall in gas and oil exports.

The decline in stock prices of Russian companies began in May, but the starting point of the 2008 crisis is considered to be September 16, when the prices and indices of the RTS and MICEX collapsed, as a reaction to the events of September 15 in the United States. Trading was suspended, and despite the rise in stocks and indices in the following days, the market entered a state of complete uncertainty.

Bank bankruptcies began and subsequent mass layoffs began. A number of banks were bought out by government agencies such as Russian Railways and Gazprom, but problems in the banking sector forced the Central Bank to cover bank losses with gold and foreign exchange reserves totaling about $100 billion.

Anti-crisis measures

The first anti-crisis measures were announced by the Russian government in September-October 2008 and included two areas:

1. Strengthening the financial system:

• curbing the depreciation of the ruble, which cost the budget a quarter of its gold and foreign exchange reserves;
• repayment of external debts and recapitalization of system banks. Expenses exceeded 3% of GDP, but, according to the World Bank, this is what made it possible to keep the banking system stable in conditions of extreme liquidity shortages, prevent panic among depositors and resume consolidation of the banking sector.

2. Financial support for large enterprises

First of all, systemically important and key ones for the country: Gazprom, Rosneft, Russian Railways and others. In total, assistance was provided to 295 companies.

Results

The Russian Federation ended the crisis year of 2008 with a drop in GDP of 10.3%, which was the largest in the previous ten years. But already at the end of 2009, the Russian stock market showed record growth and practically won back the previous fall. In general, losses turned out to be significantly lower than predicted and, according to foreign experts, primarily due to timely anti-crisis measures.