The Son of Finance of the Great Age

  Chapter 555 Lifeline Project (Part 1)

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  2007 is undoubtedly an extraordinary year, because the market risks brought about by the excessive prosperity of subprime housing mortgage loans broke out in August and spread rapidly, making the global financial system face huge challenges. As time went on, more and more familiar names appeared on the list of losses on subprime mortgage bonds, including HSBC, UBS, Citigroup, Merrill Lynch and Stanley.

  Although the European Central Bank, the Bank of Japan, and the Federal Reserve have successively injected huge amounts of liquidity into the market and released liquidity in the form of lowering interest rates, the situation is still not very optimistic. Wall Street investment banking giant Merrill Lynch (MerrillLynch) in the third quarter appeared in the history of the largest quarterly loss, the amount reached 2.24 billion US dollars. Now, although the financial statements for the fourth quarter have not been disclosed, some analysts have pessimistically analyzed that Merrill Lynch will still suffer losses in the fourth quarter, and the maximum amount may reach 3.24 billion US dollars.

   Just on Christmas Eve, Merrill Lynch announced three sales plans, preparing to hand over the ownership of Merrill Lynch to ease the current financial difficulties.

   This is not the first company to be in crisis because of subprime mortgage bonds, but it is the first among Wall Street giants to fail. Nevertheless, people are still cautiously optimistic about the prospects of Merrill Lynch. After all, such a giant with hundreds of billions of assets can be brought back to life as long as enough funds are injected.

  Although optimistic about the prospects, problems still exist and need to be resolved after all. Hopefully, things will go in a good direction, as the central bank, the Federal Reserve, cannot sit idly by, even though they have tried their best to save the market by cutting interest rates and injecting liquidity.

  In late December, the Federal Reserve Committee submitted a reform plan on the subprime loan crisis to the US Treasury Department. This time they will join hands with the Treasury Department to solve market problems. They have realized that it may not be easy to reverse the current unfavorable situation only by changing the monetary policy.

  Washington, D.C., Treasury Department building east of the White House.

  New Year's Eve was supposed to be a holiday, but the three-story building was brightly lit and busy people were everywhere. A statue of Alexander Hamilton stands at the entrance on the south side, looking ahead amidst the lights. One of the founding fathers of the United States and the first Secretary of the Treasury in the history of the United States stood there quietly, as if he was escorting the US economy, and seemed to be supervising the work of the younger generations.

In a high-level conference room on the third floor, Henry Paulson quietly looked at the statue of Hamilton downstairs. After a long silence, he suddenly closed the curtains, and turned his head to the people who had been waiting at the conference table for a long time. Said, "Gentlemen, are you all here? Let's get started!"

  When Paulson was looking out the window, no one spoke in the entire meeting room, not even the sound of panting. Everyone knows what to see from there. It is also clear to everyone what the current situation means.

  The crimson oval conference table is full of people. Those who can discuss state affairs with Henry Paulson at this time are all well-known figures in the financial system. Chairman Bernanke and Vice Chairman Geithner of the Federal Reserve, Ben Sennan, Chairman of the American Banking Association, Kenneth Lewis, CEO of Bank of America, John Mark, Chairman and CEO of Stanley, Daniel Mulder, CEO of Fannie Mae, Deme CEO David Moffett...

   Many elites including the Ministry of Finance, the Federal Reserve, commercial banks, large real estate companies, investment banks, etc. are gathered here, and the content to be discussed is naturally how to rescue the real estate market. The sub-prime mortgage crisis that occurred in August has affected commercial banks and financial institutions, and now the financial giants are desperately hoping that the Ministry of Finance can stand up and help them tide over the current difficulties.

   "Ben, what about consumer credit defaults in a few days?"

  Although the situation is overwhelming, Henry Paulson is still calm. After taking this position, he deeply realized how different the work here is from his work as the CEO of Goodman Company. In Goodman Company, he only needs to be responsible to tens of thousands of employees and shareholders around the world, but now every decision he makes needs to be responsible to the people of the United States, and he always accepts difficulties from the market. Gradually take heart and nourish nature. And he also knows that despite the enormous pressure, losing his temper and acting abnormally will not bring any substantial effect at all, but will affect the emotions of the staff around him.

"Although the statistics have not been completed yet, according to the existing data, the default rate has risen sharply, and the overdue repayment rate may reach the highest point in six years!" Ben Sennan, the chairman of the American Banking Association, sighed lightly, with a blank expression on his face. He replied with an expression, "Maybe the situation will be worse, you have to be mentally prepared."

  As soon as he finished speaking, everyone's expressions changed, even Henry Paulson was no exception.

As we all know, the root cause of this financial crisis is the bursting of the real estate market bubble, which in turn affects the repayment of loans with real estate as collateral, and Wall Street has securitized these loans and packaged them into bonds and credits with different ratings. Derivatives, which have brought in large institutions and insurance companies that use bond investment as a means. Therefore, if the real estate market cannot recover, the crisis in the entire financial system cannot be eliminated.

The fact now is that the overdue rate of housing loan repayment may rise to a historical high, which means that more homeowners have chosen to stop supplying houses, and the situation in the housing loan market has further deteriorated, while other corresponding derivatives Naturally, the market will not be much better.

  After Ben Sennan finished speaking, there was silence in the venue. Although all the elites present here are the elites in the American political and business circles, they alone or the combination of several companies cannot leverage the real estate market in the United States at all. So soon, all their eyes were on Henry Paulson and Bernanke.

"The Federal Reserve will cut interest rates at the right time and inject liquidity into the market again." Bernanke also remained expressionless, "In addition, if necessary, we can provide liquidity support to companies with capital needs, but the amount The aspect will not be too big. In addition, we are discussing a new regulation on how to prevent high-risk mortgage loans. Although it is a remedial measure, we will do our best to save the market."

  After speaking, Bernanke raised his brows and spread his hands towards the crowd with a helpless expression.

   In all fairness, so far, the decisions made by the Fed have been effective. In September, November and December, they cut interest rates one after another and continued to inject liquidity into the market to ease the crisis. However, compared with the huge real estate market in the United States and the even larger CDO and CDS markets, the funds injected by the Federal Reserve are simply a drop in the bucket. (My novel "The Son of Finance of the Great Era" will have more fresh content on the official WeChat platform, and there will also be a 100% lucky draw gift for everyone! Open WeChat now, click the "+" sign on the top right to add friends ", search the official account "qdread" and pay attention, hurry up!)

  (end of this chapter)