Feng Yu woke up from his dream. The plane is about to land, and he is in New York again.
Wind & Rain Consulting had bought a lot of US real estate companies' shares, and he is here to see when is the best time to sell them.
In Feng Yu's previous life, many people know that the US had a serious sub-prime mortgage crisis this year, and it quickly affected the global financial industry. Most people thought the trigger was Fannie and Freddie.
But in fact, there are some clues now, and the real trigger is the second biggest sub-prime mortgage lender in the US, New Century Financial Corporation.
What is sub-prime mortgage? The US classifies a person's credit rating into five levels. The first and second levels of credit rating are good and good, and they can get preferential loans. The remaining three levels of credit rating are lower, and they can only use sub-prime loans.
To put it bluntly, subprime loans were loans prepared for people with poor credit ratings and low incomes.
Many people in the US like to take loans to live. All kinds of bank loans, credit card purchases, and so on, they thought that this kind of life was very good, and in their lifetime, they enjoyed life.
Hua Xia's way of saving money and spending is ridiculous to them.
This is because the prices of many products will increase by the time you save enough money. The price increase might be higher than the bank's interest. Why not take loans to spend? You can enjoy a better life, and you might even save money.
But this statement was also very ridiculous, because the price of many products would decrease over time. In other words, the value of the product would depreciate.
You will have to pay high interest for the product, and you will suffer more losses. You will be able to enjoy the benefits in advance, but this burden will affect you for the rest of your life.
Unless it was a necessity, such a lifestyle, in the eyes of many Huaxia people, was akin to eating grain and squandering the family!
Many Hua Xia's people do not dare to take loans as they are afraid they will not be able to repay the debt. But in the US, people are very bold in taking loans. What if they cannot repay the debt? That's easy. Just get another loan from another bank and pay back the money here, right?
Two credit cards can be used at the same time, and the repayment period will be one month later. This way, you will have one more month to make money to repay the debt.
Theoretically, this is possible. But what if you do not make enough money? Originally, if you borrowed 10,000 yuan, you only needed to pay 10,200 yuan. But if you borrowed 10,200 yuan from another bank, you would have to pay even more.
After swiping through multiple credit cards, you would find that the original 10,000 yuan had become 12,000 yuan, and it was still increasing.
As long as one of the banks thinks that you are late in repaying the loan, this scheme will fail. The borrower may have to use other assets to repay the debt. If they couldn't pay up, then they could only choose bankruptcy protection.
It seemed that bankruptcy was a kind of protection for you. You didn't have to rush to pay back the money, and you didn't even have to pay it back. But during bankruptcy protection, all your spending will be restricted, and you will be supervised by the bank and even the police. How can people who are used to living a comfortable life accept this?
On the other hand, many older people preferred it this way. Once they went bankrupt, some of them would rather go to jail. It was better to have food and water than to starve to death on a street corner.
Normally, when you take out a loan, the bank and other financial institutions will definitely assess your ability to repay the loan and confirm that you will be able to repay the loan.
You either have a stable income, or have a fixed asset collateral, or have a guarantor and so on.
But in the US, these are for concessional loans. For subprime loans, these conditions can be relaxed.
As long as you can prove that you have an income, you can get a loan. The guarantor's audit is not strict enough. Many guarantors do not even have a job. They can just find a temporary worker. There are also mortgage loans. Even if the collateral is not worth that much, some companies still dare to lend.
Many people have the same thoughts as Hua Xia. They are worried that they can't repay the loan. They are still young and don't want to go to jail. The outside world is so much better.
The root cause is George W. Bush. After he came to power, he started a housing program for minorities. He wants to complete the housing program for at least 5.5 million minority families during his term.
He said that promoting housing is an important factor in the US's safety.
But the minority families are not well-educated and can't find a stable job. How are they going to buy a house?
At this time, subprime loans are needed.
The interest of subprime loans is at least 2% to 3% higher than concessional loans. In short, the worse your credit rating, the higher the interest.
Speaking of this, everyone has a feeling that subprime loans are like taking wool from a thin sheep. The thinner you are, the more you will be taken advantage of.
Their income is low, and the interest on the loan is higher. They are under more pressure to repay the loan. This is a serious hidden danger.
It was very likely that these people would not be able to repay the loans. In this case, the bank would suffer losses, and there would be bad debts.
But what does the bank's losses have to do with Fannie and Freddie?
Fannie and Freddie are an important part of the housing program. They buy mortgages from the bank and make money.
What does this mean? The bank had lent 1 million yuan, and they can get back 1 million yuan of principal and 1 million yuan of interest. But when they sell it to Fannie and Freddie, they can only get 1.5 million yuan.
This way, the bank has more cash flow and can lend to those who buy houses. Fannie and Freddie also earn some interest. When you see this, do you feel that it is familiar?
Many finance companies lend money to individuals. This is a type of usury. What if they can't get back the money? They sell the IOU to those debt collectors.
1 million IOU, and the repayment is 2 million. They sell the IOU to the debt collectors for 1.3 million, and the debt collectors find a way to get back 1.5 million. They have some profits, and the debt collectors also have some profits.
The Fannie and Freddie Group, to put it bluntly, played the role of a debt collection company, but with the acquiescence of Congress, they turned the accounts into financial products such as bonds and issued them.
Fannie and Freddie had made a lot of profits in the beginning. Their CEO's annual income is more than 15 million USD. Among the world's top 500 CEOs, only a few people can match him.
Where did Fannie and Freddie get the money to buy the bank's mortgages? One is to go public, and the other is to issue their own funds, bonds, etc.
In Feng Yu's previous life, Hua Xia had bought a lot of Fannie and Freddie's bonds, and in the end, they lost a lot of money.
But in this life, Hua Xia had already sold the bonds of Fannie and Freddie, and even listened to Feng Yu's advice to sell the shares of the real estate industry. The Americans can only pay for this mistake!
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