"Get up in the morning and punch the air twice, for no other reason than to fuck the world!"

This is a joke that Li Zhiyi saw on the Internet before, and now he uses it to give himself a chicken blood injection every time he gets up early.

At seven o'clock in the morning the next day, classmate Xiao Li got up from the bed with difficulty, wielding his tortoise fist, went to the cafeteria to eat something to fill his stomach, and then ran to the library.

There are basically no classes at Columbia on Fridays, so the library is always overcrowded, and you have to get up early to grab a seat.

Even because the Butler Library is open 24 hours a day, some ruthless people simply sleep in the library. They open their eyes to study and close their eyes to sleep. The weekend is over as soon as they open and close their eyes...

Li Zhiyi felt that whether those who could become academic greats had high IQs or talents, their physique and energy were definitely far superior to ordinary people. They definitely grew up drinking camel milk when they were young.

But classmate Xiao Li is different. When he was a child, he stopped drinking milk powder, which is the kind of milk powder that has a dark green transparent package with a picture of a heifer printed on it.

For this reason, he often comforts himself that it is understandable that he is not good at studying. How can he, a mortal, compare with animals?

Li Zhiyi was thinking nonsensically as he found a seat in the library, opened a computer document and typed out the title of the discussion he wanted to write: The Origin of the Subprime Mortgage Crisis.

Although the current financial crisis has not yet been characterized as a 'subprime mortgage crisis', in fact many insiders have realized the problems that caused the storm. The old man Mishkin who resigned and went back to school to compile a book will now be there on the 1st

Compiled content on the subprime crisis in the eighth edition of "Money and Finance".

Therefore, Li Zhiyi argued that there was no problem in directly writing about the subprime mortgage crisis, and regardless of the professor's request to write about the credit market, he personally also wanted to make a summary of the subprime mortgage crisis.

Because the subprime mortgage crisis is a huge event that spans many years and involves the entire U.S. financial system, writing about it clearly will be very helpful in making a fortune in the next few years.

Most ordinary people’s understanding of subprime mortgages is the bankruptcy of Lehman Brothers in 2008, but in fact this matter can be traced back to several years ago when George W. Bush first took office.

There was the Internet financial bubble before the early 2000s, and then there was the 9/11 incident.

Two consecutive blows of eighty-one sledgehammers have made the American people doubt life. They no longer believe as they did a few decades ago that America is great and the Qing Dynasty is about to fall!

The people lost confidence in the country and were afraid to invest with cash in their hands. For a time, economic development stagnated and even risked recession.

At this time, George W. Bush took office. George W. Bush did not want to become the king of the country. He said that the crooked-necked tree behind the Capitol should be left to latecomers. During his term of office, the great American dream must live long!

He decided that the great American dream would start with everyone having their own big house.

So Mr. Greenspan, an alumnus of Li Zhiyi and the then chief executive of the Federal Reserve, closely followed the leader and decided to cut interest rates with a wave of his hand. He also helped the president get control of Congress and drafted a series of bills to stimulate banks to provide loans to "low-credit people" to buy houses.

"This thing is called a subprime loan.

Then it’s time for the banks to perform. How smart are banks? How much money can they make by honestly providing loans to poor people to buy houses? Since the Congressmen support real estate, let’s go big!

So they used their smart brains and chose to cooperate with Wall Street to package subprime loans into CDOs and then sell them.

The so-called CDO is a guaranteed debt obligation, which can be simply understood as a tradable loan contract.

Originally, the bank loaned 1 million to the poor to buy a house, with the stipulation that the 1.5 million must be paid back with interest within thirty years. Now, after the bank lends money to the poor, it directly sells the loan contract to Wall Street for 1.05 million.

Although you will earn 450,000 less in this way, you can immediately get the money to lend to the next poor person, making small profits but quick turnover; before, a loan of one million could only be loaned to one poor person, but now after repeated rounds, one million can be loaned

For thirty poor people, the leverage will be super doubled.

Wall Street is smarter. After thinking about it for a while, it decided to split the CDO and sell it on the securities market. Besides, Wall Street is the ancestor of super doubling!

In this way, banks are profitable, Wall Street pimps are very happy, and poor people have big houses to live in and big steaks to eat. Hello, I am hello, everyone. For a time, the American economy no longer hurts my waist, and my legs are no longer sore.

I can go up to the eighth floor in one breath.

But there are some small problems with the details here. Living in a big house can be understood as the support of the Congressmen, but what about eating big steaks?

Real estate speculation!

The trivial matter of house speculation is common all over the world. Although the American people are not very good at mathematics, buying a house with 0 down payment and then mortgage it to buy a second house is quite easy.

And as Marx said, with 300% profit capital, one would dare to commit any crime and even risk being hanged.

The profits of banks and Wall Street's super doubling game are not only 300% but also 250%. In this case, they sent themselves to the gallows and started to help poor people with bottom-line loans.

It's a big stage for loans, so you can buy a house. It doesn't matter what your conditions are, everyone is equal here. At this stage, even a dog in the United States can get a loan to buy a villa.

And they don't think they have much risk. Real estate is booming anyway, so they can just take back the house if they can't pay back the money.

But I never expected that the real estate bubble would explode, or that it would explode so violently.

In the second quarter of 2006, the U.S. GDP declined, housing prices fell, and the subprime loan default rate increased. At this time, the American people could no longer feel the warmth of the Congressmen. They thought that I was repaying the loan by speculating in real estate. Since housing prices were falling, why not?

Damn it, just take the house back.

Since then, the game of beating the drum and passing flowers can no longer be played. House prices have fallen, subprime mortgage default rates have increased, and house prices have fallen again...

By August 2007, mortgage banks were unable to survive due to super doubling, and excessive subprime mortgage default rates caused them to collapse.

As soon as this incident occurred, panic was immediately transmitted to the credit market, and people who bought CDOs panicked and sold CDOs one after another.

Investors in Wall Street investment banks panicked when they saw it, and rushed to Wall Street shouting, "I'll get your money back tomorrow."

By this time, it was not just the credit market that was in trouble, the entire capital market was in crisis. Investment banks were not only engaged in CDOs, but also had many other businesses.

With the huge losses of CDOs and super doubling, investment banks have to tear down one wall to make up for the other, so the entire financial industry is in danger.

In early March 2008, Bear Stearns, the smallest of the five major pimps on Wall Street, was the first to be swallowed up by market panic and declared bankruptcy.

Other small mortgage banks and investment banks collapsed one by one and were submerged in history without even making a splash. Time has accelerated to the present, and Lehman Brothers, the penultimate pimp of the five major pimps, is almost gone.

This was the process of the entire subprime mortgage crisis. The subsequent bankruptcy of Lehman Brothers was just the trigger, causing the crisis to sweep across the world with an intensity that was beyond everyone's expectations.

In this crisis, banks, Wall Street, the government, and countless others have played notorious roles, and their actions represent the way the entire U.S. financial system operates.

"I would like to ask, if the risk of subprime loans is very high as you wrote, why are there so many people buying (CDO)?"

As soon as Li Zhiyi typed the last line on the keyboard, he heard a familiar voice coming from his ears. He turned around and saw that it was indeed Long Qi.
Chapter completed!