Mortgage crisis, causes of financial crisis in USA and World (part 6)
a question will occure out ” Does the investment banking is a bank”?
the answer is “no”. It is only financial company that only “similar” to the bank. In fact investment banking is more free than the bank and has not bound by the bank rules. Investment banking can do a lot of financial transactions such as: accepting a variety of “deposits” from the owners of money, loan the money, borrow money, buy companies shares, be a guarantor, buying house, selling private house , and may do something that people can’t do . Even can do other things that can not be done by the bank. Lehman Brothers, Bear Stern, Fanny Mae and many others are the kind of corporate investment banking firms.
The Banking investment companies Flexibility and freedom make it more aggressive in giving loans without any limitation provisions at once.The Investment banking can buy a company and sold it at any time. If they has not sufficient found, they also can apply of found to anyone, other banks or to fellow investment banking Or to the rich people who have lot of money, known as “personal banking”.
The Investment banking salles are very aggressive offers loan facility. formerly, the only people who have fulfilled certain requirements (prime) which can obtain a mortgage, then in fact the people that are less qualified (sub-prime) are stimulated to take a mortgage.
In the United States, all citizens have a “rating”. High or low a rating score determined by how much income and wasteful lifestyle the person are. The person who called prime is the person whom has a rating over 600 ( Six up ).
Every year people can estimate their own, ratings go up or down.
When rating has reached 600, he will able to have a house through a mortgage program. If his rating has not reached 600 yet, then he must strive to reach 600. The Way are scrabbled up and keep to work hard so that his salary increases and much savings. Thus i also decrease to spend for nothing so the income getting up then expenditures (spending money).
However, as the explanation above, the company must growing up and profits have increased, then the market housing (potential customers) were made as like bubbles. How? for example, everyone whom the rating is still at sub-prime 500 has already offered a mortgage. The assumption, is if the borrower fails to pay or stopped to pay the house could be confiscated and After that the house can be resold at the highest price than the value of loan for the the assumption, house and land prices will chase the top charge year by yea and will never decrease.
Related posts:
- Mortgage crisis, causes of financial crisis in USA and World (part 5)
- Mortgage crisis, causes of financial crisis in USA and World (part 7)
- Mortgage crisis, causes of financial crisis in USA and World (part 4)
- Mortgage crisis, causes of financial crisis in USA and World (part 3)
- Mortgage crisis, causes of financial crisis in USA and World (part 2)
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