In the United States, people seldom pay cash for buying a house, but rely on long-term loans. However, people with unstable income or no income at all are defined as subprime lenders because their credit rating can't meet the standard.
Anyway, it won't cost them much money, and countless citizens will not hesitate to borrow money to buy a house. As a result, all the money of A Niu Loan Company was lent out. Can it be redeemed? A Niu, the chairman of the board of directors, naturally knows the market risks, so he dare not keep the proceeds for himself. He must find a partner to share the risk. So A Niu found the leading brother in American economic circles-investment bank. Can you hesitate when you see the profit? ! So after evaluation and packaging, a new product-CDO (debt-backed bond) was born. After all, it is a bond. By issuing and selling CDOs, the holders can share the loan risk.
Because the risk is too high, no one dares to buy it, so the investment bank divides it into two parts: advanced and ordinary CDO. In case of debt crisis, senior CDO has the priority to pay compensation. With the golden words of the investment bank, the senior CDO certainly sold a full house.
But what about the remaining ordinary CDO high-risk bonds? So the investment bank found a hedge fund Hedge funds, on the other hand, play a role in the financial circles all over the world and live a life of licking blood. This is a small risk! So I borrowed money from the bank with the lowest interest rate in the world, and then bought a lot of ordinary CDO bonds. Before 2006, the loan interest rate of the Bank of Japan was only1.5%; The interest rate of ordinary CDO may reach 12%, so hedge funds make a lot of money just by interest difference.
In this way, something wonderful happened. At the end of 200 1, American real estate soared, more than doubling in just a few years. As a result, people who bought houses with loans, A Niu loan companies, major investment banks, banks and hedge funds all made money, but the investment banks were not happy!
At first, I thought the risk of ordinary CDO was too high, so I threw it to hedge funds. I didn't expect these guys to earn more than themselves, and their net worth is still rising. I knew I kept it for fun, so the investment bank started buying hedge funds and planned to share it.
Now hedge funds are very happy. Who are they, bandits who have 10 dollars in their hands and can still try to borrow 10 dollars for fun? How can they be honest with the popular CDO now? So they mortgaged their CDO bonds to the bank, got a loan of 10 times, and then continued to chase after investment banks to buy ordinary CDOs.
Investment banks timely "created" a new product called CDS (Credit Default Swap). Didn't everyone think the original CDO was risky? Then I took out the insurance, and every year I took out some money from the CDO as a deposit and gave it to the insurance company for free, but if there is any risk in the future, everyone will bear it together.
The insurance company thought, yes, at present, CDO makes so much money that 1 divides the money into profits without losing it. Isn't that giving me money for nothing every year? Fuck!
Hedge funds thought, yes, it has been earned for several years, and the risks will become bigger and bigger in the future. Just by sharing part of the profits, the insurance company will bear half of the risks. Let's do it! So once again, everyone is happy and CDS is on fire!
Smart Wall Street people have come up with an innovative product based on CDS-Sanmao Fund, with an initial scale of 50 billion yuan, which is specially used to invest in buying CDS. Before Sanmao Fund, the risks of a series of funds were very high, but I used the 5 billion I earned before as a deposit. If this fund loses money, then use this 5 billion to advance. Only when the 5 billion yuan is lost, the principal of your investment will start to lose money. Before that, you can redeem it in advance. God, is there a better fund? 1 yuan face value of the fund, lost 0.90 yuan will not lose their own money, but every penny earned is their own.
When rating agencies saw this genius idea, they didn't hesitate at all: give AAA rating! As a result, "Sanmao" sold like crazy, and all kinds of pension funds, education funds, wealth management products, and even banks in other countries bought it. Although the initial scale was set at 50 billion yuan, the number of subsequent issues was almost impossible to estimate, but the deposit of 5 billion yuan has not changed. If the existing scale is 500 billion yuan, the deposit can only guarantee that you will not lose money if the net value of the fund is not less than 0.99 yuan.
By the end of 2006, the American real estate, which has enjoyed a beautiful scenery for five years, finally fell from its peak, and this food chain finally began to break. Because of the falling house prices, the time limit for preferential loan interest rates has come. First, ordinary people can't repay their loans, and then the A Niu loan company closed down, and hedge funds suffered huge losses, which in turn implicated insurance companies and loan banks. Citigroup and Morgan issued huge loss reports one after another, at the same time, the major investment banks that invested in hedge funds also suffered losses. Then the stock market plummeted, people generally lost money, and the number of people unable to repay their mortgages continued to increase ... Finally, the subprime mortgage crisis broke out in the United States.
Facing the subprime mortgage crisis and economic recession in the United States, different countries seem to be connected with it through different "transmission chains". The path of "transmission" to China is mainly reflected in two aspects: one is through the flow of financial funds, and the other is through trade and the real economy. From the perspective of capital flow, it is not obvious at present. But some experts firmly believe that in the next two years, a new financial crisis will sweep the world. The biggest victims of this financial crisis will be some emerging market countries, which will have a very prominent impact on China's economy and bring challenges to China's economic development.