Sub-prime Debacle: The Greed and Folly of i-Banks Brought the Entire World Economy to the Brink of Catastrophic Collapse
Sub-prime Debacle: The Greed and Folly of i-Banks Brought the Entire World Economy to the Brink of Catastrophic Collapse
B. K. Sharma
Electronics & Communication Department
National Institute of Technology
Patna-800005, India
ABSTRACT September 2008 saw the complete collapse of the Major Investment Banks in US. The collapse of US financial system led to the freezing of inter-bank loans globally. As a result Investment Banks world over are heavily loan ridden and with too little capital to continue with their day to day transactions. This has led to Global Credit Crunch which in turn has led to mounting bankruptcies of small firms, reduction in production activities, layoffs and sharp fall in share price index. The main trigger of this rapidly spreading economic malaise of credit crunch was the issuance of home loans to people with no income-no job-no no-assets. These were called NINJA loans. These NINJA loans were converted into Mortgaged backed Securities and these MBS were insured as Credit Swap Obligations(CSO) making them 100% failure proof