The subprime mortgage crisis refers to the shock, panic and crisis in the international financial market that began in the summer of 2007 due to the sharp increase in defaults and credit crunch in the U.S. subprime housing credit industry.

Subprime mortgages refer to loans provided by some lending institutions to borrowers with poor credit and low income. In recent years, the United States and other countries have relaxed credit standards for home purchases (no down payment, no proof of income, no consideration of the quality of the mortgage unit, etc.), creating a subprime mortgage market. Subprime housing loans are estimated, combined, and packaged using financial engineering methods by lending institutions and Wall Street, and then sold in the secondary mortgage market in the form of bills or securities products, with high interest rates used to attract other financial institutions and hedge funds to purchase.

But the good times did not last long. The real estate market in the United States began to deteriorate in 2006. The U.S. dollar interest rate increased several times, which increased the delinquencies and bad debts of subprime housing credit, and the prices of subprime housing credit products increased. The decline has directly caused financial crises for many financial institutions in Europe, the United States and Australia, and even faced bankruptcy, causing a contraction in global credit. In order to cope with the large-scale redemption wave from customers, some funds borrowed Japanese yen to close their positions. The method of large-scale investment was no longer feasible. They had to sell stocks to cash out, which is the so-called unwinding of Japanese yen carry trades. This caused a series of domino effects that led to the global Stock markets plummeted.

Fannie Mae and Freddie Mac, which originally accounted for 70% of the U.S. subprime loan market, were dominated by government agencies and packaged loans into securities, promising that investors would receive principal and interest rates. As scandals broke out about the two companies, the government imposed restrictions on their business growth, and the entire subprime mortgage market began to compete for the loans purchased by the two companies. Throughout the process, new market participants excessively pursued high-risk loans out of profit-seeking purposes. When Fannie Mae and Freddie Mac dominated the mortgage market, they often had clear lending standards that strictly dictated what types of loans could be made. Today, due to the intervention of thousands of high-risk hedge funds, pension funds and other fund investors around the world, the original lending standards have become a piece of paper in the face of high interest rates. New market participants and Wall Street dealers Lenders are constantly encouraged to try different loan types. Many lenders do not even require subprime borrowers to provide proof of financial qualifications, including tax forms. When doing home value appraisals, lenders also rely more on mechanical computer programs rather than the appraiser's conclusions, potentially risking It's buried deep in the subprime loan market.

Since the subprime mortgage crisis broke out in August 2007, it has caused great impact and damage to the international financial order, causing a strong credit tightening effect in the financial market. Sexual financial risks are exposed. The financial crisis caused by the subprime mortgage crisis is the most serious financial crisis in the United States since the "Great Depression" in the 1930s. The subprime mortgage crisis that originated in the United States is spreading across the world. The global financial system has been significantly affected, and the crisis has impacted the real economy. China was also affected by the subprime mortgage crisis.

Excessive innovation of financial instruments, distorted interests of credit rating agencies, and deregulation of monetary policy are the main causes of the U.S. subprime mortgage crisis. Although the response measures taken by the U.S. government such as substantial capital injections, consecutive interest rate cuts, and direct intervention have achieved certain results, they have not fundamentally solved the problem. The enlightenment this brings us is: financial regulation policies must conform to the economic situation and comply with the laws of cyclical fluctuations; innovation of financial products and their systems should be promoted on the basis of strengthening financial supervision and improving risk prevention mechanisms; and we should seize favorable opportunities. , encourage overseas asset mergers and acquisitions, optimize overseas asset structures, and diversify overseas asset risks.

References Baidu Encyclopedia: Subprime Crisis