Outline 4.1 4.2 4.3 6.1 6.2 6.3

1.

S&P20083(write-downs)2,800[1]2006 [1] Standard & Poors report on subprime losses on March 14th, 2008 by Scott Bugie.

2.

25[2]293%600%500% 100%5 1990911 20002001136.5%20041%(baby boomers) [2] Office of Federal Housing Enterprise Oversight (OFHEO) 2006 6 House Price Increases Continue; Some Deceleration Evident.

US Federal Reserve Board, May 2008

2. (adjustable rate mortgage, ARM) (no doc)[3]95% 100%

63 %1994200469%100600 [3] (NINJA)NINJANo Income, Job or Assets.

US Census Bureau

2.

What goes up must come down.

3.

(assets securitization)1970(mortgage-backed security or MBS)(originator)Sponsor(trust)(loan pool) (originator)(borrower)(sponsor)(investor)

3. 20(tranches)(claims)(high-priority or senior tranches)(collateralized mortgage obligations, CMOs)(debt)(underlying asset)MBSCMO(CDO, collateralized debt obligation)

MBS(default)(prepayment) CMOCDOCDOCDO2CDO3(re-securitization)

4.4.1

4.2

4.3

4.1 (senior tranches)(residual claims)(credit enhancement)(redistributed but not reduced)[4]AAA

CDOCMOsponsor(information asymmetry) [4] Ambac, MBIA FGIC 2008

4.1 S&P Moodys(tranches)[5] [5]Structured finance ratings: criteria for rating synthetic CDO transactions. Standard & Poors, 2003.

4.2 (Ginnie Mae, Government National Mortgage Association) (Freddie Mac, Federal National Mortgage Association)

(subprime borrowers)A(Alt-A borrowers)7.6%A5.7%75%90%AGinnie MaeFreddie Mac

4.2 (stress test)2007

CDO(tranches)

4.3 (sponsor)(SPE, special-purpose entity) (trust) (off-shore limited liability company) CDO SIV(first lien)

SPESPE(duration mismatch)(SIVs, structured investment vehicles)

4.3 SIV(asset-backed commercial papers, ABCP)SIV SIVSIV

CDO SIVSPESPE SPEsCDO SIV

5. 2007CMO/CDO/SIV2006 200120041720064(ARM)20072008(interest reset) 4% (negative equity)(loan/value ratio) 100%

5. 2007(delinquent)(foreclosures) 36,00028,000A200740%25%

20074Bear Stearns611Bear Stearns30

10117965 CDO

[6]Federal Reserve Bank of New York, Dec. 2007 [6]Alt-A

Alt-A PoolsSubprime Pools13,143 14,674 157 11,758 23,743 946 60 Days Overdue2%5%3%7%15%8%Foreclosure1%3%3%3%10%5%Bank-Owned2%1%2%6%2%2%

5. sponsor

2007AAA(junk bond) SIV SIV(ABCP)2007ABCP1,200775SIV

5.200781,032918(Fed funds rate)4.75%

200820081215%(FOMC)3(0.75%)

310Bear Stearns13Bear Stearns20(primary dealers) 14(JP Morgan Chase)Bear Stearns48% 16Bear Stearns 300(non-recourse, back-to-back loan)Bear StearnsBear Stearns159299%10290

5. 31834302% 31832.25%(Bernake) Its going to get worse before it gets better.[7]Freddie Mac 2011

GDP(recession) [7] 20071114Bernanke As these credit problems resolve and as, we hope, the housing market begins to find a bottom, that the broader resiliency of the economy, which we are seeing in areas outside of housing, will take control and will help the economy return to a more reasonable growth pace. Which is to say it's gonna get worse before it gets better.

S&P/Case-Shiller Indices [8] [8] 20082012(CME)

6.

6.1 6.2 6.3

6.1 20082GDP 1% 1,670(stimulus package)6001,200330055

560

30% 20%2,0001.541.772.9

6.1 (Presidents Working Group on Financial Markets, PWG) Paulson331(Blueprint for Regulatory Reform )(SEC)(CFTC)(Mortgage Origination Commission)

PaulsonEnron(Sarbanes-Oxley Act) Paulson(dual banking system)[9] [9] CSBS 330The plan demonstrates a lack of regard for the important checks and balances provided for in the current (dual banking) system.

6.2 (discount rate)(Fed funds rate)4430 lender of the last resort, [10]1282,6003Bear StearnsBear Stearns [10] Northern Rock Bank24020082

6.3

6.3 [11]CDO/SIV 10122530Paulson Morgan StanleyBear StearnsLehman Brothers 4140(Washington Mutual)AIGFreddie Mac [11]10122530

[12] Bear Stearns3/17/2008

CitigoupAbu Dhabi Investment Authority11.26.200775 Kuwait Investment Authority1.15.200830The Government of Singapore1.15.200868.8Merrill LynchTemasek Holdings24.12.200744Kuwait Investment Authority01.15.200820Korean Investment Corp.01.15.200820Morgan StanleyChina Investment Corporation12.19.200750 UBSThe government of Singapore12.200797.5Bear Stearns[12]China Investment Corp.()10.200710

7. (functional or departmental) (EWRM, enterprise-wide risk management)[13](identify)(measure)(manage)Bear StearnsBear Stearns [13] Enterprise-wide Risk Management: Strategies for Linking Risk and Opportunity by James Deloach, 2000

7. Countrywide Financial [14] (de-regulation)(re-regulation)(over-regulation)(financial innovation) 2%[15]Alan Greenspan [16] [14] 200837Oversight and Government Reform Committee200220064,600[15] Bernanke 5133(LIBOR)(remain abnormally high.)(still far from normal)[16] Greenspan 200846 ( the evidence that monetary policy added to the bubble is statistically fragile.)

7. counterparty risk(moral hazard)[17]

4281,050(National Retail Federation)513[18]40%420 [17][18] NRFhttp://www.nrf.com/http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=515

7. [19]Christopher Cox 422

1987, 1998, 2007(fat tails) [19] 1307(NRSRO, Nationally Recognized Statistical Rating Organizations)S&P Moodys80%

8.CDOSIV20082 SIV897 20070.24 %313.3

8. 20082 SIV897 313.320070.24 %

8.

[20] SIVSIV896.99

2008/2/29[20]200712712.280.19%196.22 SIV193.050.05%125.89 896.990.24%313.30

8.

8.

/ 2000

2001

Adler, Robert, Raya Feldman, and Murad Taqqu, A Practical Guide to Heavy Tails: Statistical Techniques and Applications, Birkhuser Boston, 1998, p55.

Culp, Christopher L. Structured Finance and Insurance: The ART of Managing Capital and Risk Wiley Finance, 2006, pp 451-452. James Deloach, Enterprise-wide Risk Management: Strategies for Linking Risk and Opportunity, Financial Times Management, 2000

Raynes, Sylvan and Ann Rutledge, The Analysis of Structured Securities: Precise Risk Measurement and Capital Allocation, Oxford University Press, 2003, pp.15-16

Saunders, Anthony and Marcia Cornett, Financial Institutions Management (5e) , McGraw-Hill, 2006.

Tavakoli, James M. Collateralized Debt Obligations and Structured Finance : New Developments in Cash and Synthetic Securitization, John Wiley and Sons, 2003

Watson, Ronald D. Subprime Mortgages, Market Impact and Safety Nets, Rutgers University, 2008

Eichengreen, Barry. Can the Moral Hazard Caused by IMF Bailout be Reduced?, Geneva Reports on the World Economy Special Report 1 , 2001

PS. 2008