8/14/2019 The Global Financial Meltdown

1/18

GLOBAL FINANCIAL MELTDOWN:CAUSE AND EFFECT ANALYSIS

Author: Tejas Bhatt

8/14/2019 The Global Financial Meltdown

2/18

8/14/2019 The Global Financial Meltdown

3/18

8/14/2019 The Global Financial Meltdown

4/18

The sub prime crisis: Cause & EffectSubprime lending is the practice of making loans to borrowers who do

not qualify for market interest rates owing to low credit history,employment income etc.

The value of U.S. subprime mortgages was estimated at US$2.5 trillion.

Boom and Bust in the housing marketBetween 1997 and 2006, American home prices increased by 124%.

U.S. household debt as a percentage of income rose to 130% during2007, versus 100%.

An estimated 8.8 million homeowners nearly 10.8% of totalhomeowners have zero or negative equity as of March 2008.

8/14/2019 The Global Financial Meltdown

5/18

Bankruptcy/Takeover flavor of the season

Bear Stearns was acquired in March 2008 by J.P. Morgan Chase for $1.2billion.

Fannie Mae and Freddie Mac. would be placed into conservatorshipgovernment control.

Merrill Lynch was acquired by Bank of America in September 2008 foron.

Lehman Brothers declared bankruptcy on 15 September 2008.

The Fed provided an emergency loan of $85 billion to AIG, giving the USgovernment a 79.9% equity stake at AIG.

Washington Mutual taken over by JPMorgan Chase.

Citi Bank, GM and Chrysler on the brink of Bankruptcy.

8/14/2019 The Global Financial Meltdown

6/18

GLOBAL ECONOMIC OUTLOOK 2009-10

Emergingeconomies SinkingEconomies

8/14/2019 The Global Financial Meltdown

7/18

ASIA AND THE UNLUCKY NUMBERS

ASIAS

INDIA

5.1 %

CHINA

6.7%

SINGAPORE

-5%

GDP IN2009-10

JAPAN

-2.6%

SOUTHKOREA

-4%

HONG

KONG-2.4%

8/14/2019 The Global Financial Meltdown

8/18

8/14/2019 The Global Financial Meltdown

9/18

TATA MOTORS-LAND ROVER & JAGUAR:

Why did Ford sell them?

Deal Size: US$ 2.3 Billion

Main Business is Light Trucks and Mini Vans

Ford reported loss of $12.6 billion in 2007

8/14/2019 The Global Financial Meltdown

10/18

8/14/2019 The Global Financial Meltdown

11/18

8/14/2019 The Global Financial Meltdown

12/18

ARE INDIAS POMPOUS CELEBRATIONS OVER?

Agriculture is set to growby 2.6 % against 4.9 %.

Manufacturing is likely toexpand by 4.1 % against

8.2 %.

Financial, Insurance andReal estate are set togrow by 8.6 % against

11.7 %.

Trade, Hotels, Transportand Communication isprojected to grow by

10.3 % against 12.4 %.

FY 09-10

8/14/2019 The Global Financial Meltdown

13/18

So is India really immune?

Indian Banksreluctant to lend

The GreatIndian Retail

Indian Inc.forced to show

ory zz es ou

The CovetedMBA tag loses

shine.

FMCG, Pharmato rescueeconomy.

RupeeDepreciation

8/14/2019 The Global Financial Meltdown

14/18

Recommendations for Discussions,

Elaboration and action:Regulatory FrameworkEstablish and rectify the loopholes present Regulatory systemsand periodically review them periodically.

Finance

Lower down the interest rates to spur housing demand andconsumer spending.

TaxationRaise the Tax bracket for people and provide tax reliefs toboost the purchasing power.

Public Spending and InvestmentMassive infrastructure spending should be the prime objectiveof the Government.

8/14/2019 The Global Financial Meltdown

15/18

8/14/2019 The Global Financial Meltdown

16/18

THE SUPER POWERS IN MAKING:

8/14/2019 The Global Financial Meltdown

17/18

SPECIAL THANKS:RBI REPORT

IMF REPORT 2009

McKINSEY QUARTERLY REPORT

FINANCIAL TIMES

HARVARD BUSINESS REVIEW

B SHIVARAMAN

GOLDMAN SACHS

WIKIPEDIA

CNBC TV 18

8/14/2019 The Global Financial Meltdown

18/18

THANK YOU

TEJAS BHATT