About Subprime and the 2008 Financial Crisis

Recently, the financial crisis and its related terms have become buzzwords in their

own right. Terms such as 'Subprime', 'Lehman Brothers', 'Collaterised Debt

Obligations (CDOs)' and 'Mortgage Backed Securities (MBSs)' appear every day

in local newspapers, while experts of all stripes proffer various recommendations

on how to avoid the next financial crisis. But do we really understand what the

Financial Crisis is about? What caused the crisis? How did the government

respond? If it is a real event that has occurred, can a similar crisis be avoided in the

future? If so, what can be done to prevent a similar meltdown?

Definition and Key Characteristics

The recent Financial Crisis can be defined to be a series of events, starting in 2007

with the bursting of the US housing bubble and ultimately culminating in the freeze

in credit and short term money markets, which coincided with the drastic falls in

asset prices around the world.

Most financial crisis start with investors seeking a higher return on their capital.

Some would call it greed while others would label it as a maximisation of

individual utility. This time was no different.

In the years following the collapse of the dot-com bubble, the Federal Reserve

(Fed) lowered the Federal Funds rate (which corresponds to the rate at which banks

lend money to each other) from 6.5% to 1.0%. This was done to stimulate lending

and consumption, to mitigate the effects linked to the dot-com crisis and to prevent

the economy from slipping into a recession.

Apart from the Fed initiatives, interest rates also came under pressure from the

increase in the current account deficit, due to high government and private

expenditure.

Current Account (CA) + Non-Financial Account (NFA) + Official Reserves

Settlement (ORS) = 0

The basic balance of payments accounting schedule indicates that when current

account experiences a deficit, the change in the Non-Financial Account (NFA)

must be positive. Deficits must be financed with capital inflows and in this case,

the foreign entities invested in the US treasury bonds which ultimately reduced

yields and interest rates.

Ultra-low interest rates are a double edged sword. As debt servicing costs drop,

consumers have an added incentive to take on more debt. At the same time, the

return on saving deposits drop, and the savings rate decreases.

At what level should interest rates have been fixed?

In fixing interest rates, central bankers sometimes rely on the Taylor rule, a

monetary policy guideline developed by US Economist John Taylor which

prescribes the ideal nominal interest rate which should be used as deviations in

inflation and output are observed over time.

In its simplified version, the rule can be represented with the following equation:

I = T + R + a (T - T*) + b (Y - Y*)

where I is the nominal interest rate

T is the rate of inflation

T* is the targeted rate of inflation

Y is the actual Gross Domestic Product

Y* is the targeted Gross Domestic Product

a, b are parameters describing the sensitivity of central bank policy to

deviations in inflation and output

In the paper written by John Taylor, entitled 'The Financial Crisis and the Policy

Responses: An Empirical Analysis of What Went Wrong', the US Economist

argues that the Fed was overly aggressive in lowering interest rates.

John Taylor goes on to argue that the Fed, by lowering interest rates drastically to

stimulate the economy, inadvertently sell buy here pay here accounts provoked the Housing boom and its

subsequent bust.

However, had the central bankers followed the Taylor rule and had they lowered

interest rates in a less drastic manner, it is anyone's guess whether the economy

would have instead gone into a period of price deflation, as in the case of Japan in

the 1990s.

In his paper, John Taylor went on to study the correlation between the Fed funds

rate and the interest rates set by other Central Banks. He found that there was a

statistically significant relationship which indicated a certain degree of correlation,

and coordination between the Central Banks.

While he does not explain why this is so, it is easy to come up with some reasons.

Assuming that world Central Banks do not coordinate in the fixing of interest rates,

every bank would set her rates independently which would lead to frequent changes

in interest rate differentials. Countries would suffer destabilising inflows and

outflows due to speculative activity (like the Carry Trade), which is reason in itself

to pursue a coordinated monetary policy.

However, low interest rates alone cannot explain the reason why there was a

housing bubble or why a credit crunch occurred. To put things in perspective, we

also need to consider the role of Government Sponsored Entreprises (GSEs).

What are GSEs and what did they have to do with the crisis?

Government Sponsored Entreprises (GSEs), such as Fannie Mae and Freddie Mac

were originally created by the US government to further certain social goals, such

as increasing access to home ownership. GSEs do so indirectly by facilitating the

flow of credit. Typically, banks provide home loans to borrowers who are unable to

finance the entire purchase with the existing resources. However, the number of

loans that a given bank can grant is limited by the equity on its balance sheet and

national regulations. In order to encourage banks to lend more, GSEs purchase

loans on the loan book, thus providing the banks with cash to continue lending. By

facilitating the flow of credit and indirectly financing home loans, GSEs play in

key role in improving access to credit.

GSEs are only allowed to purchase conforming loans, which place a ceiling on loan

to value ratios. This ensures that borrowers within their means. For a loan to be

classified as 'Conforming', there are also restrictions on the minimum income

required and other administrative requirements.

In theory, such as system should function perfectly. However, in the US, these

entities were structured in such a way so as to create perverse incentives which led

to the subsequent development and collapse of the US housing bubble.

Take Fannie Mae for example. The Federal National Mortgage Association, also

known as Fannie Mae, started as a government institution in 1938 but was

converted into a private shareholder owned corporation in 1968. The organisation

was later listed on the stock exchange.

As a profit driven company with shareholders to answer to, Fannie Mae soon came

under pressure to increase its profit margins. However, it was restricted to buying

low yielding 'conforming loans'. Ceding to shareholder pressure, it began to relax

underwriting standards and started to purchase higher yielding sub-prime loans as

well. Loan to value restrictions began to slip.

With Fannie Mae purchasing lower quality loans, lending institutions were now

free to lend to a wide spectrum of borrowers, which include low or no income

individuals. With the easy access to credit, people began to commit to house

purchases with little regard to price and affordability. Housing prices began to

creep up.

With property prices increasing, people began to see housing as an investment

opportunity. Like the Tulip mania, the popular perception was that prices had no

way to go but up. People began to borrow to invest in property. The increased

demand caused prices to move up drastically. Between 1997 and 2006, the price of

a typical house in the US increased by 124%.

As the housing boom continued, people were able to use their houses to finance

their consumption as well, drawing cash out of their homes using Home Equity

Lines of Credit. The world began to observe a new era of monetary excess, with

Consumer Price Index (CPI) inflation, averaging 3.2% annually from 2005.

The role of securitization and how it is related to the low interest rate environment

When GSEs such as Fannie Mae purchase loans, they repackage them into

collaterised instruments such as Mortgage-Backed Securities (MBS). MBSs are

made up of a series of mortgages pooled together using a trust structure. These

MBS are later sold to investors. Owning an MBS represents a claim on the cash

flows from the underlying mortgages.

In the previous section, we argued how the privatisation of the GSEs led to an

increase in the number of sub-prime loans granted. As long as these loans are

serviced, they are highly profitable. Including a certain quantity of these loans in

any MBS would increase the MBS' yield.

Because MBS' often contained a certain percentage of sub-prime loans, MBS

marketers were able to offer high yields to attract investors. At the other end,

interest rates remained low, and investors began to look to higher yielding

instruments to generate better returns on their capital. Hedge funds, Pension funds,

Universities and other institutions began to purchase MBS' on a non-negligible

scale.

With investor appetite for MBS' came well known mortgage brokers like Lehman

Brothers, which generated significant revenue from fees generated by purchasing

mortgage loans, packaging them and reselling them to other investors.

Certain critics argue that Rating Agencies were complicit in the whole process.

These critics allege that the rating firms knew about the fundamental instability of

the MBS', but continued to award high ratings, often triple A, in return for high

fees from the MBS sponsors

http://www.infobarrel.com/About_Subprime_and_the_2008_Financial_Crisis

How To Shop Smarter When You Need A Vehicle

The process of looking for a new or used vehicle is all-consuming. There are many cars to check out and just as many options to consider. That is why you need to have reliable information on hand to help make this process a smoother one. Here, you will find the advice you need to get the car of your dreams quickly.

Take into consideration the overall price that you are going to pay. Dealers can make any monthly price happen, but you'll pay monthly prices for years on the total cost of an outrageously-priced car. Focus your negotiating on getting the best deal possible on the total price and financing you receive. Then you can work on how much it will cost monthly.

Prior to getting a used vehicle from a dealership, be sure to ask a third party mechanic to look at it. When a dealership refuses, they are usually hiding something. A mechanic will help you identify issues and recognize signs of a wreck if you are purchasing a used car.

Whenever you're in the market for a car, understand that you are going to spend quite a bit of time at the dealership. You don't want to be rushed so you act on a deal that doesn't really make you comfortable. Plan for several hours, at least. If you are really short on time, do not be afraid to leave and come back another day.

Don't go car shopping by yourself unless you are certain you have excellent sales resistance. Try bringing a relative or friend to ask important questions and negotiate offers. Tell them exactly what you're looking to buy and how much you have to spend before you go.

Test drive a car before buying it. Test drive the vehicle you have chosen before beginning negotiations. There is no substitute for the actual experience of driving the car. You may find the car doesn't handle as you would like or isn't as smooth as you expected.

Being a car dealer means trying to make quotas. Use this to your advantage and shop for your car at month-end. Salesmen who are missing a few sales will give you a great deal to meet the quota. This allows you a little bit more wiggle room in your price negotiations.

You should consider renting the type of car you want to buy to try it out. This allows you to learn more about the cars you are considering. Try going on a type of road trip with your loved ones to see if it works for you. It's a cheap way to make sure that you're getting the right car before you purchase and make a commitment to it.

Try and purchase your vehicle towards the month's end. Everyone has a quota to meet each month. You might find a salesman is more willing to cut you a better deal if he is in the last week of the month and is still short of his quota.

A good way to figure out what kind of car is ideal for you is by attending an auto show. Auto shows are the best place to directly make vehicle comparisons. This also gives you the opportunity to talk to knowledgeable folks. You should be able to walk out of an auto show with a good idea of the cars you'd like to look into further.

Form a budget prior to heading out and looking at a car. You need to have a firm idea of how much car you can afford. You should establish a monthly budget for your car payments and your insurance. Try to find your loan before finding a car.

Always make an effort to do research before getting a used car. There are sources on the Internet that will tell you what a car is worth. In order to find out the value of a car, use NADA or the Kelly Blue Book. If the car is priced higher than these sources have them priced, go somewhere else.

When buying a car, think about fuel economy. Though economical cars may more initially, the amount you save on gas is worth it. Keep this in mind as you choose a model.

Cars go for better prices at the end of a month. Salesman need to make monthly goals which means you can help them get to that goal. Allow yourself several days time at the end of a month to negotiate a deal.

If your salesman says that they are going to tell their manager your offer, then be aware that their initial counteroffer won't be the lowest. Make sure you provide another counter offer, and then you'll know it's the lowest they will go. They should come back with a rock-bottom price at this point in the process.

Make sure you've discovered the rebates before you purchase a car. You need to find a car dealer with a good rebate. Unethical dealerships may fail to mention a rebate if bhph note buyers you do not bring it up, and you will never know that you could have saved money on the deal.

Don't skip the test drive. You can't get a feel for the car if you don't drive it. The last thing that you want are problems after you sign the contract, so make sure to test drive the vehicle.

Look for a vehicle that is well known for being dependable, with a reputation for inexpensive repairs. You don't need to pay a lot every month just to keep the car running. Look online for reviews on the vehicles you are considering to learn from others' experiences.

Talk to your family or coworkers about dealerships they have used. See if any would actually recommend the one that they used. Have a conversation about details including post-sales service. If many people recommend a place, it's a good indication you should visit that place.

If you are shopping for a car, you need to have quality information that will help you to make a good choice or you may walk off the lot with a purchase you'll regret. Keep these tips in mind to make your transaction a pleasant one. This way, you will really have a good time purchasing your next vehicle.

15 Most Dangerous and Safest SUVs

The Insurance Institute for Highway Safety says that SUVs are now statistically safer than they were in the past and released their list of the buy bulk auto loans safest - and most dangerous - SUVs on the market today.

The Institute's research demonstrates that driver death rates have dropped due largely to the widespread availability of electronic stability control systems (ESC), which reduce vehicle rollover rates.

"The rollover risk in SUVs used to outweigh their size/weight advantage, but that's no longer the case, thanks to ESC," Anne McCartt, the Institute's senior vice president for research, said in a statement released today.

The overall driver death rate for 2005-08 models during 2006-09 was 48 per million registered vehicle years.

The Insurance Institute for Highway Safety is a nonprofit organization that strives to reduce deaths, injuries and property damage due to crashes, according to their website. They take human factors, vehicle factors and environmental factors into account as they study ways to make our nation's roads safer.



Check the lists of 15 safest, and most dangerous, SUVs below to see where your car falls:

15 Safest SUVs:

Audi A6 4-door 4WD

Mercedes E-Class 4-door 4WD

Toyota Sienna

Ford Edge

Nissan Armada

Land Rover Range Rover Sport

Land Rover LR3

Honda CR-V

Jeep Grand Cherokee

Acura MDX

Mercedes E-Class 4-door

Lexus RX 400h

Lexus GX 470

Mercedes M-Class

Saab 9-3 4-door

15 SUVs with Highest Rates of Driver Death:

Nissan 350Z 2-door

Nissan Titan crew cab

Chevrolet Aveo

Chevrolet Cobalt

Nissan Titan extended cab

Kia Spectra

Chevrolet Malibu Classic

Hyundai Tiburon

Nissan Versa

Chevrolet Colorado extended cab

Nissan Titan crew cab

Kia Rio

Kia Spectra

Mazda Miata MX-5

Subaru Legacy

http://abcnews.go.com/US/15-dangerous-safest-suvs/story?id=13805473

Choosing The Right Kitchenaid Food Processor

You should definitely make sure that you research your options ahead of time when making the decision to purchase a food processor. The goal is to make sure that the product you are purchasing will meet all of your needs and standards in the kitchen. These are a couple reviews on Kitchenaid Food Processors that should help you come to an informed decision before you make your purchase:

Kitchenaid Food Processor KFP740 9-cup

Take your home cooked creations to the next step with this Kitchenaid Food Processor! It comes with a 9-cup work bowl that is ideal for combining a great deal of ingredients at once. You won't need this much space for all of your cooking jobs, so there is an additional 4-cup mini bowl included for your smaller jobs. This mini bowl comes equipped with a small chopping blade which is specifically designed for chopping the smallest items. Additionally, this blade is ideal for mincing items such as garlic or onions. This also works for preparing baby food! Your prep time can be cut in half with this Kitchenaid Food Processor!

Kitchenaid KFP740 Food Processor Product Features:

- 1/2 Hp motor

- Product Dimensions are: 11 x 8.3 x 14 inches ; 17.4 pound

- Multipurpose stainless steel blade for all types of cutting, slicing, chopping, etc.

- Base and accessories are easy to clean

- Pulse control

- Comes with both 9-cup and 4-cup working bowl

- Includes all standard accessories

- Comes with a 1 year full replacement warranty

Kitchenaid Food Processor KFP750 12-Cup

This powerful piece of machinery will take care of all your slicing and chopping needs! This Kitchenaid Food Processor comes with a 700 Read more watt motor, and is fully capable of taking on any food prep task you've got! Don't worry about this machine making a lot of noise- it comes with a sealed housing, making it much quieter than other food processors. The last thing you want to hear is more noise in the kitchen! The 12-cup work bowl that comes with it allows you to work with enough ingredients at once that you can keep working without taking constant breaks to empty your bowl. There is a 4-cup mini bowl included as well for your smaller jobs! This Kitchenaid Food Processor comes with such bonuses as dough blades, a spatula, a slicing disc, and a shredding disc. This is an appliance your kitchen cannot do without!

Kitchenaid KFP750 Food Processor Product Features:

- 700 Watt motor

- 10.5 x 8.2 x 15.1 inches ; 15.5 pounds

- 24 pounds

- Available Colors are Chrome, Black, White, Red & Pink

- Pulse control

- Comes with both a 12-cup and a 4-cup mini working bowl

- Dual feed tubes are included that are able to take care of a variety of slicing and chopping sizes

- All accessories (including the base unit) are easy to clean. Accessories are dishwasher safe.

- 1-year replacement warranty is included.

http://food.ezinemark.com/choosing-the-right-kitchenaid-food-processor-31ecf59bbb6.html

Need Car Shopping Help? It's Found In This Article

For some people car shopping is exciting and rewarding, while others find it to be an awful experience that they wish to avoid. If you don't look forward to shopping for a car, it's best to make some preparations first. Keep reading for the information you need to know about buying a car.

Be sure that you know what type of car you're looking for and some specifics, such as price, before you leave to go car shopping. How much can you spend? How many do you need the car to seat? What type of fuel economy are you interested in? Do you want a vehicle with four doors or will two suffice? Make some notes about the things you really want the car to have, and take the list along.

Know what type of vehicle you are looking for before stepping foot into a dealership. You should do some research online to learn more about different kinds of vehicles before you make your decision. You will also learn what price range to expect, making it less likely that a smooth salesperson will catch you unawares.

Don't ever pay full price. The list price is certainly not set in stone. If you do not feel comfortable with your negotiating techniques, bring a friend with you who is. Know what the fair selling price is before you go so you have some idea of what you want to pay.

When you are ready to purchase a new vehicle, know your budget prior to visiting the dealer. Do not go over what you planned to spend, no matter what payment plans your dealer offers. Do not let the salesperson talk you into purchasing an expensive car if you are going to spend the next years struggling to make your payments.

Do not limit your choices to just a dealership. You might be shocked to find the car you want from a person selling their car privately. Search through community area classifieds and hunt through social media to focus your search on cars available in your neighborhood.

Before you begin car shopping, write out a budget. You should know exactly what you can afford. Find out how much you're able to spend on car payments monthly. Even look for a loan prior to your car search.

Ask the dealer to let you have the vehicle inspected by the mechanic you have. Be sure to have a trustworthy mechanic standing by. Don't use the mechanic that the dealer suggests. The mechanic should tell you whether it can be driven and if it's a good enough deal for the price.

Look no further than the Internet when you are looking for a used vehicle. You don't have to visit a dealership in order to buy a car in modern times. Search sites such as eBay and Craigslist for the best selection. Doing this can get you a cheaper car and skip out on having to put up with dealership pressure tactics.

If you are extremely interested in a vehicle, spend time thoroughly checking it over. Be sure to look for any dents or scratches on the outside of the car. Inspect the interior to find rips, stains or other flaws. Remember that once you purchase a car, it's yours. This includes all the stains, rips, dents and scratches.

If you have a specific model in mind, give the dealer a call to see if they have one available. If you appear on the dealer's lot, a salesperson is going to work hard to get your business. If you really want a four door sedan and they don't have any, that's a waste of your time. Give them a call to avoid this hassle.



One of the best times to shop for your new car is at the end of the month. Salespeople want to meet their monthly goals by making another sale that could put them in their desired count. Come in a few days before the month ends so you can negotiate over time if you need to.

Check out your dealer's service department. Do some research to find out how current customers feel about the service. Call their department and ask for any advice you've found answers to in order to test them. Select a dealership with smart sales and service staff who are happy to assist.

Realize that the first offer that they come up with is most likely BHPH Note Buyer not the best offer that you can get out of them. Make another offer, and the next offer on their part is generally going to be a better one. They don't want a long, drawn-out negotiation any more than you do, so a couple of offers should get you a good rate.



If you plan to trade in your vehicle, learn its value before you go to the dealership. Do not take it for granted that the dealer will give you the best price as a trade-in on a new vehicle. This will allow you to know how much you're likely to get out of the deal so you can factor it in to the price you accept on the new car.

Some people love the adventure involved with buiyng a new or used vehicle while others are fearful of the process. Knowledge is the main factor in having a pleasant shopping experience. Apply what you've just learned, and stand ready to negotiate your way into your new car.

Can't Find A Good Car Price? Try This!

Are you currently in the market for a new or used car, truck or SUV? Are you scared to start looking? You should relax and go over this article to find out more about the techniques that will help you secure a good deal and the features you should look for in your new vehicle.

Do some online window shopping ahead of time. You shouldn't visit the dealership until you know precisely which make and model you desire. You should do a little Internet research first to see what brand might work for you, which cars are the safest and other things that a dealership won't tell you.

Before going to a dealership, you should know what you want. Do research online before you shop to find out what type of vehicle is best suited for your family and budget. This can also help you become aware of the prices to expect on a particular vehicle, making it less likely that you will be taken advantage of by a fast-talking salesperson.

Don't buy without test driving. This will give you a feel of how good the car drives. There could always be an issue with that specific car, and you will never know unless you drive it.

Speak with your bank regarding loans before you head out to purchase a new car. Doing this helps ensure your security. Sometimes you can get a better interest rate through the dealership, but it's best to check through your bank too.

Wait until you have a deal on the vehicle of your choice prior to discussing trade-ins, incentives or down payments. All of this should come out of your agreed bottom line. You can get a fairer deal if you do it this way.

Shop for a car towards the end of a month. It is the crunch time for quotas, so salespeople want to sell, sell, sell. At month's end, the salesperson may still need to meet his quota, and he will be more conducive in giving you a better deal just to make a sale.

You might have the perfect car in mind, but it might not be available to you. There may be options that you would like to have that aren't offered. You'll live without heated seats!

If buying used, ask the dealer to let you take the car to a mechanic. The mechanic should be trustworthy. The mechanic should be someone that you hand pick personally. Having a mechanic there isn't to drive the price down or to intimidate the dealer. It's only to ensure that the car is worth buying.



Read before you sign anything. You could be getting in some serious trouble if you're out there blindly signing money away. The document binds you once it is signed. You can even ask to take the contract home to look over it some more. If that is not realistic, get your hands on a copy.

Do your homework. There are many online sources that will inform you of what a certain car is worth. Find out the value of your car from the KBB or the NADA book. If a dealership offers a vehicle for a price above those quoted in these sources, head someplace else.

Before visiting a dealership, feel free to call in advance and ask them if they have the specific car model you are interested in. The salesman will do everything they can to have the car ready for you. Make sure, though, that the car is there for you. Call ahead and find out.

Do not agree to as-is warranties when it comes to used cars. Doing so is a recipe for disaster. You should have at least a 60 day warranty in place upon purchase. If the transmission or engine blows the day after you drive off the lot, you will be responsible for the repair.

Check into all the different incentives before you negotiate a price. You need to research the many aspects of incentive programs. It will facilitate negotiations if you're knowledgeable about various offers and come across as an educated consumer.

Do you feel any more confident? This advice is priceless and it will help make your shopping experience in purchasing a car a good one. Everyone close to you will benefit from this sell buy here pay here accounts advice, so feel free to share it.

391K Ford Rangers now in Takata airbag inflator recall tally

391K Ford Rangers now in Takata airbag inflator recall tally

DEARBORN, Mich. — Ford Motor Co. announced Tuesday that all Ford Rangers from model years 2004 to 2006 are now recalled for potentially faulty driver-side airbag inflators.

This follows news of an estimated five-million-vehicle expansion of the series of Takata airbag inflator recalls revealed Friday

Ford's action affects a total of 391,394 Rangers, 361,692 of which are in the United States and its territories even though 29,334 are in Canada.

A release from Ford says that the business is conscious of one particular report of a death connected to a Takata airbag deployment.

Sell Auto Notes