Mainly Business Studies: Credit crunch

Showing posts with label Credit crunch. Show all posts

From elsewhere but worth a read

The derivatives market is worth more than $516 trillion, roughly 10 times the value of the entire world's output: it's been called the "ticking time-bomb." Unsurprisingly, this news comes to us from Britain; the U.S. media is not going to mention it.

The complex and opaque derivatives markets -- land of hedge funds and complex financial instruments -- has been dubbed the world's biggest black hole.

It operates outside of the grasp of governments, tax inspectors and regulators, in a parallel, shadow world to the rest of the banking system. They are private contracts between two companies or institutions, which can't be controlled or properly assessed. In themselves derivative contracts are not dangerous, but they can have an enormous domino effect on the rest of the financial world.

Most markets have something backing them up. But derivatives don't have anything, because they are not real money, but paper money. It is also impossible to establish their worth; the $516 trillion number is actually only a notional one, and some estimates say there is a mind-boggling $1 quadrillion (1,000,000,000,000,000) held globally in derivatives.

Anything that carries a price can spawn a derivatives market. They are financial contracts sold to pass on risk to others. At the core of this market is the credit derivative swap, effectively an insurance policy against the default in the interest payment on a corporate bond -- although you don’t even need to own the bond itself. It’s like buying an insurance policy on someone else's house and pocketing the full value if it burns down.

Many experts that I personally respect, and that have studied this issue for decades, believe that the U.S. financial crisis is an intentionally designed scenario of a Problem-Reaction-Solution:

1. Create a problem covertly and blame someone or something else for what you have secretly done.
2. Tell the people through an unquestioning mainstream media the version of the problem you want the masses to believe.
3. Then openly offer, through changes in society, the 'solution' to the problem you have yourself created. This 'solution' is always the installation of more centralized control.

Take these simple coordinates and apply them to the events of the last few days and weeks and everything morphs into focus.

The banking 'crash' has been coldly designed to create the 'problem' that can lead to the 'solution' -- a massive centralization of power in the 'private' and 'government' banking systems, both of which are owned and controlled by the same network of families.

The 'World Central Bank' plays a major role in this area and wants to impose and control the entire global financial system. As a result of the economic turmoil, we are now seeing this being proposed to 'solve the problem' of the banking chaos and to 'make sure it never happens again.'

You can see the very clear direction in this area, as the U.S. government just bought $250 billion in shares of the nine largest banks in the United States.

The Overall Plot

It is very clear that the intention here is to keep people hopeless and pessimistic. These individuals realize that choice is a very powerful element of capitalism, but choice depends on the freedom to choose.

They understand that when you are shackled with debt you don’t have the freedom to choose. People in debt become hopeless, and hopeless people don’t vote. There are two ways people are controlled. First of all frighten people, and then demoralize them.

Poor, demoralized and frightened people think that the safest thing to do is take orders and hope for the best.

An educated, healthy and confident nation is harder to govern. There is an element of many in control in the government that does not want people to be educated, healthy and confident because they would be out of control.

Stay Positive

As I said in my commentary on this last month, the REAL danger here, and believe you me it is a danger, is to become afraid. Once you step into the powerful emotion of fear and you put your intention on what you don't want the consequence is you activate powerful natural forces that tend to provide you with whatever thoughts you are attaching strong emotions to. This is clearly something you want to avoid doing, so stop being afraid of the economy.

It is important for you and your family to CANCEL any negative thoughts about this. I simply yell "Cancel!" and imagine a large red diagonal line going through any image I don't want. The more you and others do that, the more likely we will all reap the benefits of this positive focus and intention.

Hang in there and CONTINUE TO FOCUS ON WHAT YOU WANT, and the real key is to attach as much emotion to what you want.

Great Encouraging Audio For You

For the past year I have participated in a coaching program run by Dan Sullivan. Dan is an amazing mentor for me and has really helped me in many ways.

It really is hard to stay positive in this current economic climate. The quickest antidote to this is a shift in perspective. So last week Dan provided his thoughts on one of the fastest acting medicines to restore and maintain your confidence and all the capabilities that go with it.

Dan suggested to visit the audio page once a day for a five-minute boost, or listen to all five audios at once if you have time.

Either way, he guarantees that these short audios will point out where you can easily find huge value that doesn't fluctuate with the markets.

Aspiring to go to a top University?

To get to a top university you need to have good A levels, success in various interests and, of course, good English.

We have spent about a week doing the Credit Crunch.

Dima did a presentation.

Mary wrote a long blog.

All of you were set homework to summarie the credit Crunch in 750 words.

I'll be collecting that in on Wednesday.

Meanwhile take a look at this - written by another A level student studying elsewhere.

Financial Crisis Explained (again)

How Can A few bad mortgages in the suburbs of Florida lead to the Bankruptcy of a country like Iceland? What has caused the stock market to fall by 40% -the worst decline since the Great Depression? And why has the credit crunch pushed the global economy into recession?

The Subprime Mortgage Fiasco Explained

The Dot com bubble burst in 2001. Shares in internet companies collapsed and with events of 9/11, the US faced recession. The Federal Reserve responded by cutting interest rates to 1% - there lowest level for a long time.
Low Interest rates encouraged people to buy a house. As house prices began to rise, mortgage companies relaxed their lending criteria and tried to capitalise on the booming property market.
Mortgage companies actively sold mortgages to people with bad credit, low incomes - often first generation immigrants. This 'subprime market' expanded very quickly.
Mortgage salesmen were paid on commission. Therefore, they often hid the true cost of adjustable rate mortgages and did little to check whether the homeowners could actually afford repayments in the long term. Even the feeble lending checks were ignored
Many took out adjustable rate mortgages which were affordable for the first two years, but, then the interest rate increased making mortgage payments much more expensive.
In 2006, inflationary pressures in the US caused interest rates to rise to 4%. Normally 4% interest rates are not particularly high. But, because many had taken out large mortgage payments, this increase made the mortgage payments unaffordable.
Also many homeowners were not coming to the end of their 'introductory offers' and faced much higher interest rates. This led to an increase in mortgage defaults and companies lost money.
As mortgage defaults increased the boom in house prices came to an end and house prices started falling.
The falls in house prices were exacerbated by the boom in building of new homes which occurred right up until 2007. It meant that demand fell as supply was increasing causing prices to collapse, especially in suburban areas.
The Fall in house prices made the mortgage defaults more costly. If house prices are rising and someone defaults, the mortgage company can get most of the loan back by selling the house. But, now with falling house prices, they may end up with only a fraction of the house value.

The Role of Credit Default Swaps

You might imagine that this irresponsible lending by US mortgage companies would mean they would go out of business - end of story. However, the problem of the US mortgage defaults was spread across the financial system.

Mortgage companies in the US borrowed from other financial institutions to lend mortgages. They sold collateralised mortgage debt in the form of CDOs to other banks and financial institutions. This was a kind of insurance for the mortgage companies. It means that other banks shared the risk of these subprime mortgages.
Because these subprime mortgage debts were bought by 'responsible' banks like Morgan Stanley, Lehman Brothers e.t.c. risk agencies gave these highly dubious and risky debt bundles triple A safety ratings. Thus banks either ignored or were unaware of how risky their financial position was.
Therefore, when mortgage defaults in the US occured, many banks and financial institutions around the world had to write off bad assets. E.g. AIG had been insuring many of these mortgage debts so was faced with huge losses
The extent of this bad debt is estimated by the IMF to be close to £1.3trillion.

Freezing of Money Markets.

In addition to bad debts, the other problem was one of confidence. Because many banks had lost money and had a deterioration in their balance sheets. They couldn't afford to lend to other banks. This caused a shortage of liquidity in money markets.
Banks usually rely on lending to each other to conduct every day business. But, after the first wave of credit losses, banks could no longer raise sufficient finance.
For example, in the UK, the Northern Rock was particularly exposed to money markets. It had relied on borrowing money on the money markets to fund its daily business. In 2007, it simply couldn't raise enough money on the financial markets and eventually had to be nationalised by the UK government.
Because banks were short of liquidity, they have been selling assets such as their mortgage bundles. This caused further falls in asset prices, further liquidity shortages and further deterioration in bank balance sheets. (The Paulson plan is to try to reverse this cycle by the government buying these financial assets no one else wants to buy.)

The Vicious Cycle of the Financial Crisis

1. Share Prices

Because banks have lost money, people have been selling shares in banks. This fall in their share prices was speeded up by aggressive 'shorting' of banking stocks. The fall in share prices have compounded the problem of banks because

investors / consumers lose confidence
More difficult to raise finance on the stock market.

Part of the UK plan is to buy bank share capital to give greater confidence to the banks and enable them to raise sufficient finance.

2. Housing Markets

The shortage of finance means that banks have had to reduce lending, especially mortgages. The shortage of mortgages has caused further falls in house prices, especially in the UK. Falling house prices are magnifying the loss of banks as more default on their mortgage and loan payments.

3. Economy

Falling house prices, shortage of finance and collapsing confidence have caused the 'real economy' to decline. Investment and consumer spending has fallen therefore major economies face recession and rising unemployment. The rising unemployment increases the chance of more mortgage defaults and further bank losses

Source of all the above: http://www.economicshelp.org/econ.html

Who is to blame for the Credit Crunch?

Following Dima's talk you might like to consider the bove essay title - or just read on:

Who is to Blame for Credit Crunch?

Banks for Making Poor Loans

In the boom years, banks made an increasing number of loans with little regard to ability to repay. Banks found ways to increase the number of mortgage loans through strategies such as interest only mortgages, 100% mortgages and lending to people with poor credit histories. The result is that more homeowners are at risk of mortgage defaults. It is this rise in mortgage defaults that led to bank losses and reduced their willingness to lend.

UK and European banks could argue that they have been positively responsible compared to their American counterparts. UK banks will argue that without the US Subprime debacle, the mortgage industry wouldn't have collapsed like it has. Mortgage repossessions in the UK, although increasing by 40% in last 12 months, are still a small % of the total mortgage market.
The American subprime mortgage firms who made a rash of bad loans to people with poor credit, can find little to excuse their behaviour.
The whole banking system for selling and buying the sub-prime mortgage debts as Triple A star safe loans. Certainly the mortgage companies who sold irresponsible loans can be blamed. But, somehow these risky loans were absorbed into the whole financial system. There was a general failing in evaluating the riskiness of loans. Over confidence and complacency seeped into the whole financial system and was not just isolated in a section of the US mortgage industry. This is why the problems in a section of the US mortgage industry affected the global capital markets.

Consumers

Surely consumers should take some responsibility for taking out mortgages they couldn't pay back. However, whilst this is true to some extent, I think it is disingenuous to blame consumers too much. Mortgage companies actively targeted people with aggressive sales pitches. The real cost of mortgages were often hidden, especially in the US. It is not unreasonable for a consumer to assume if a bank is so keen to lend a mortgage then the consumer must have a reasonable chance of repayment.

Speculators

Rising house prices encouraged people to buy houses. In London, many houses were snapped up by foreigners, this contributed to the boom. It is in these areas where house prices are now falling rapidly. However, this merely exacerbated volatility of house prices rather than causing the credit crunch.

Estate Agents

Estate agents would be a populist target. However, I don't think they can be blamed for cause of the credit crunch. They may give bad advice, like trying to encourage people to buy at the peak of a boom, but, the price of houses are determined by market forces and not estate agents. Estate agents may have fed the myth that house prices would never fall, but, they are not the ones giving mortgages to people with poor affordability.

The Government

It could be argued the government should have done more to regulate banks who were lending irresponsibly. The credit crunch has shown that financial institutions can easily abuse systems of self-regulation. The big question is whether government bail outs of banks in trouble has created moral hazard. - By preventing banks going under, have the governments given tacit approval for future bad decision making?

Source: http://www.economicshelp.org/2008/08/who-is-to-blame-for-credit-crunch.html

Here are some more from the same source:

Financial Crash in Plain English

Following years of feverish expansion, the financial system is having a fit. Low interest rates and cheap credit fuelled big gains in house prices and other assets. This created an environment in which banks were eager to take on more risk. Hence, they lent ever-more money to ever-more people in a race to the bottom of the barrel. Eventually, banks ran out of good customers to lend to, and started doling out money to people with poor credit records who had little hope of repaying their debts.

Bank then rolled up these risky loans (‘subprime mortgages’) into mortgage-backed bonds (IOUs). Using financial alchemy, bankers waved a magic wand and turned these bonds into highly rated securities. These were sold to banks, insurers and pension funds around the world. Thus, what could have been a local problem has escalated into a global drama.

How did it all go wrong?

As US house prices started to fall in 2006, the value of bonds backed by subprime mortgages started to slide. Very quickly, investors realised that they had been mugged, causing the market for mortgage-backed securities to grind to a halt. This prevented banks from parcelling up and selling on loans, thus restricting their ability to continue lending.

As banks grew anxious about each other’s exposure to these toxic loans, they became increasingly wary of lending to each other. Thus, inter-bank lending (‘wholesale lending’) dried up in early August 2007. Within a month, this ‘credit crunch’ had claimed its first scalp in the UK – Northern Rock.

The next victims

Although clever banks had sold on much of their subprime lending, many kept the supposedly choicest cuts for themselves. Then as house prices slid, the loans turned nasty and the US banks started to lose tens of billions of dollars.

Then in March, Bear Stearns, was rescued by JPMorgan Chase with government backing. The biggest bailout in history arrived at the start of this month, when the US nationalised the two biggest players in the American mortgage market, Fannie Mae and Freddie Mac.

A week later, Lehman Brothers, America’s fourth-largest investment bank, collapsed into bankruptcy. This forced number-three player Merrill Lynch into the arms of Bank of America. Next up was AIG, the world’s largest insurer, which received an $85-billion bailout in return for giving the US government an 80% stake in the firm. This week, the UK’s biggest mortgage lender, HBOS, is being taken over by rival Lloyds TSB.

What does this mean for you?

The bad news is that very few people will be entirely immune from this financial meltdown. Thanks to these poisonous loans, banks worldwide have already lost over £250 billion. Even worse, this loss could double or quadruple before things improve. Hence, in order to rebuild their capital and profits, banks must increase lending costs.

Therefore, thanks to interest-rate hikes, borrowers are being hit hard. We’ve already seen rates climb for mortgages, personal loans, overdrafts and credit cards. Nevertheless, as the economy slows down, rising bad debts will take their toll, forcing lenders into further rounds of rate rises.

Likewise, homeowners and property investors are suffering a double whammy, thanks to falling house prices, higher mortgage rates and a steep fall in the availability of home loans. Personally, I welcome lower house prices, as should anyone with plans to reach higher up the property ladder. My view is that the current property weakness will continue into the next decade, with no recovery before 2010.

In addition, stock-market investors around the world have suffered as economies begin to slow, company profits slip and share prices dive. Indeed, the failure of some massive companies has spooked investors, with the blue-chip FTSE 100 index falling below 5,000 this week -- a level not seen in three years. Although the UK stock market looks cheap on certain measures, I wouldn’t call the bottom just yet.

On the other hand, savers are doing very nicely, as a result of the banks’ desperate dash to stash more cash. Interest rates on Best Buy savings accounts have hit levels not seen since 2001. In fact, this craving for cash means that sensible savers can earn fixed rates in excess of 7%. Given that three-quarters (75%) of all Britain’s wealth is owned by the over-55s, well-heeled pensioners will benefit from higher savings rates.

Alas, rising inflation (higher prices) is undermining the value of the pound in our pocket. Last month, the Consumer Prices Index (CPI) measure of inflation hit 4.7%, its highest level since becoming the official measure of living costs. In other words, keen spenders will find retail therapy much less affordable, thanks to falling disposable incomes.

Finally, falling company profits and the economic slowdown will lead to lower tax revenues. With public spending rising relentlessly, the government will have to milk taxpayers harder in order to avoid a huge budget blowout. Thus, politicians are likely to feel the brunt of the public’s anger, with Prime Minister Gordon Brown and Chancellor Alistair Darling first in the firing line!

Source: http://www.fool.co.uk/news/your-money/2008/09/18/the-financial-crash-in-plain-english.aspx

Economics Homework

Using your own words - and being able to explain everything you write - write a 'Beginner's Guide to the current banking crisis'.

Maximum words: 750

Here is what someone else wrote:

So, for those of you who want the 3-minute version of the present crisis, here it is in 20 short steps:

In 2001, following a massive stock market and capital spending bubble, Federal Reserve Chairman Alan Greenspan worried that the U.S. faced a severe recession. He began cutting interest rates down to 1% and kept them at that level until 2004, raising them slowly only 0.25% at a time thereafter.
With interest rates so low, the financial services industry sensed a lot of money could be made and went all in on real estate, seemingly unaware that low interest rates were masking large risks.
Meanwhile, Americans had been anticipating a nasty downturn after the bubble burst. But, they soon realized that money lost in the stock market was more than offset by rising home prices. So, Americans continued to spend freely.
As Americans spent freely, the U.S. went further into debt with the rest of the world. Foreigners, used their dollar IOUs from these debts to start their own bubbles too.
Eventually, things started to unravel in 2006 when those that could least afford to purchase homes -- so called subprime borrowers -- started to default in the U.S., prices having run well out of their range of affordability.
In February 2007, HSBC issued the first major warning, a harbinger of things to come, writing down tens of billions in losses from their ill-timed 2002 acquisition of U.S. subprime lender Household International. At first things looked fine and policy makers convinced themselves and the wider public that the problem was contained to subprime.
However, when two Bear Stearns hedge funds with exposure to the US housing market blew up in June 2007, people became worried that the risks had been underestimated.
It was in August 2007 when BNP Paribas, a large French bank, froze withdrawals in three investment funds that people began to panic. If a bank with zero obvious exposure to the U.S. mortgage sector could have this measure of difficulty, anyone could be hiding untold losses. This marked the official beginning of the credit crisis. The result was mutual distrust amongst large banks operating in the global market for interbank loans which meant credit was hard to come by for many banks.
By September, liquidity in the interbank market was so bad that rumors were swirling about various institutions which received most of their funding in wholesale markets. One of these was Northern Rock, an aggressive British mortgage lender. The British public panicked and began lining up to pull their money out of the institution. The Bank of England was forced to bail out the company, subsequently nationalizing it altogether.
Meanwhile U.S. housing prices continued to decline. The result was massive losses in the alphabet soup of mortgage-related derivative assets held by large global banks. These instruments are called derivatives because their value is derived from the value in underlying assets like mortgages. The first wave of mortgage-related losses were concentrated in these instruments and investing vehicles: RMBSs (Residential Mortgage Backed Securities) CDOs (Collateralized Debt Obligations), and SIVs (Structured Investment Vehicles) and CDOs of CDOs. Merrill Lynch was the first to report a large loss, at $5.5 billion on 5 Oct 2007. Only to come back less than three weeks later on 24 Oct 2007 to say that the losses were now over $8 billion. Eventually, losses reached $500 billion a year into the crisis for all global institutions.
The Merrill losses were followed by losses at most of the large global financial institutions. Many CEOs lost their jobs and the companies were forced to raise capital. By August 2008, the amount raised was to reach $350 billion.
The situation seemed to quiet down in early 2008. However, in March the failures of hedge funds Peloton and Carlyle Capital put the credit crisis back in full view. Another 2nd period of panic resulted in the sudden collapse of Bear Stearns, America's 5th largest investment bank. The Fed organized a takeover by JP Morgan Chase that was a catastrophic 90% loss for Bear's shareholders.
Eventually the collapse of Bear Stearns faded and, for the third time, we were lulled into a false sense of security that the worst was over. Nevertheless, writedowns continued unabated as did capital raising. When Lehman Brothers announced a massive $3 billion loss 0n 9 Jun 2008, the crisis came into full view yet again -- much as it had when Bear Stearns' hedge funds collapsed the previous June.
This time, market fears did not recede and the financial markets remained in a constant state of stress. Things started to unravel very quickly. IndyMac, an aggressive mortgage lender, an American version of Northern Rock, was taken over by the FDIC. And a panic was on for the third time.
Next were the GSEs. The end result of the market panic was a questioning of the viability of Fannie Mae and Freddie Mac, the two largest mortgage lenders in the United States and at the core of the residential property market. Eventually the U.S. Government was forced to take the two companies into conservatorship.
Afterwards, all financial shares generally came under assault. The ones considered the weakest came under the heaviest selling pressure, resulting in the collapse of Lehman Brothers. Without government support and unable to close a merger in around-the-clock negotiations at the weekend, the company filed for bankruptcy on Sep. 15.
Merrill Lynch, the venerated US investment bank, sensing trouble, sought and received cover in a takeover by Bank of America that very same weekend.
Financial markets smelled blood after Lehman collapsed. Apparently no company was too big to fail. So, the assault on financial service companies continued. Eventually, AIG, the largest insurance company in the world, succumbed to this pressure. The Federal Reserve, citing special considerations, bailed out the non-depositary institution.
At this stage, we were in free fall and the entire banking system was on the verge of collapse in the United States. Global shocks had not ended either, as UK institutions were increasingly under attack as well, having been damaged by their own property bubble. At the urging of the British Prime Minister and the UK regulatory authorities, Lloyds TSB bought Britain's largest mortgage lender HBOS, which was in jeopardy of failing.
By this time, the Feds had had enough. The time for ad hoc crisis management was at an end. Hank Paulson moved decisively and put forward his $700 billion bailout plan. It awaits congressional approval.

And that's where we stand.

UPDATE: Since I wrote this a number of significant events have occurred. So, let me make an addendum to "The Guide."

Before Congress could approve the Paulson Plan, the credit crisis had moved to Europe where several banks were nationalized. Markets around the world suffered.
Congress eventually approved the Paulson Plan after much debate and initial setbacks. The Plan was augmented to include $100 billion in relief from the Alternative Minimum Tax and offer tax breaks for specific businesses as well. In addition, it raised the limit on federal bank deposit insurance from $100,000 to $250,000.
Meanwhile, turmoil in both the credit markets and the stock markets continued. Europe was still the focus as French President Sarkozy called a European crisis summit to address the situation. As the crisis worsened, National governments were forced to react and Ireland, Greece, Denmark, Austria, and Germany all offered sweeping deposit guarantees. Britain partially nationalized its banking system in a £400 Billion bailout of the UK's financial system. Iceland was forced to nationalize its largest banks and teetered on the verge of bankruptcy as it received financial assistance from Russia in return for a 75-year lease to an Icelandic air base.
Central Banks around te world acted in a coordinated fashion, cutting rates and injecting massive amounts of liquidity into themarkets. However, the markets were still unhappy and plunged anew. With the U.S. markets flirting with 2003 lows and financial stocks down by haf on the year, U.S. Treasury Secretary Paulson admitted that he might inject capital directly into American banks.

And that is now where we stand.

For the full timeline of news, visit my credit crisis timeline. I believe it to be the most comprehensive data set of credit crisis events on the web. And I update it often.

Source: http://www.creditwritedowns.com/2008/09/dummys-guide-to-us-banking-crisis.html

Second article to follow...........

Improve your Economics - impress universities...

How to solve the global crisis...

THE ESSAYS: WHAT G7/8 LEADERS CAN DO TO SOLVE THE GLOBAL CREDIT CRISIS

COORDINATING INTERNATIONAL RESPONSES TO THE CRISIS
Klaus F. Zimmermann

CALMING THE PANIC
Alberto Alesina, Guido Tabellini

HOW TO SAVE THE EUROPEAN BANKING SYSTEM
Daniel Gros

WHAT IS TO BE DONE – AND BY WHOM? FIVE SEPARATE INITIATIVES
Avinash Persaud

WHAT NEXT?
Douglas W. Diamond, Anil K Kashyap, Raghuram G. Rajan

A STRATEGY EMERGES: THE RIGHT POLICIES TO DEAL WITH THE CRISIS
Richard Portes

THE NEED FOR A COMPREHENSIVE AND GLOBAL SOLUTION
Stijn Claessens

THE CONTENT OF COORDINATION
Barry Eichengreen

WHY GOVERNMENT RESPONSES NEED TO BE COMPREHENSIVE AND COORDINATED
Charles Wyplosz

A PROPOSAL TO FACE THE CRISIS IN EUROPE
Luigi Guiso, Marco Pagano

GOVERNMENTS SHOULD BUY STRAIGHT PREFERRED STOCK IN THEIR BANKS
Charles Calomiris

AN EFFICIENT RESCUE PLAN
Roger Craine

THE WRONG FINANCIAL CRISIS
J. Bradford DeLong

Read, learn, read, learn, discuss, read, learn.....

Dima's talk

Dima is giving his lecture on Friday. I hope he covers all these 20 reasons for the credit crunch and is able to explain each.

I hope all of you are familiar with the vocabulary too - as listed on this blog a week or so ago.

Bring your cameras - Friday is a big day!

Key vocabulary - Financial Crisis

Key vocabulary:

Administration
Bear market
Bond
Bull market
Chapter 11
Collateralised debt obligation
Commercial paper
Commodities
Credit crunch
Credit default swap
Derivatives
Equity
Fundamentals
Futures
Hedge fund
Hedging
Investment bank
Limited liability Leveraging
Libor

Liquidity
Loans to deposit ratio
Mark-to-market
Mortgage-backed securities
Nationalisation
Negative equity
Profit warning
Rating
Securities lending
Securitisation
Security
Short selling
Spiv
Stagflation
Sub-prime mortgages
Swap
Underwriters
Unwind
Write-down

The above is from this Special Report.

Also read this long article

Remember, the financial crisis will affect a) businesses and b) the economy and is thus in the syllabus for both subjects.