The U.S. Sub-prime Crisis: Its Causes, Impact, And Implication For China

April 2,2007, the United States's second-largest subprime mortgage company New Century Financial Corporation announced that filed for bankruptcy protection, which begined the United States sub-loan crisis .In June, the fifth-largest U.S. investment bank Bear Stearns's two funds have a loss, further deepening the crisis. In August, the Federal Reserve, European Central Bank, Bank of Japan injected liquidity into the market, sub-loan crisis impacted on global.In March 2008, the United States Bear Stearns bankruptced. September 7, The United States Government took over the two mortgage institutions (Fannie Mae and Freddie Mac). September 15, Lehman Brothers filed for bankruptcy protection. September 21 the United States Federal Reserve Board announced that the last two major investment banks Goldman Sachs and Morgan Stanley converted to bank holding companies, which marks the five major investment banks a thing of the past. September 25, the U.S. Government deploed 700 billion U.S. dollars to save the market. October 9, the world's seven major central banks announced to join hands to save the market. October 10 Group of Seven (G7) said in a statement that they have to "take decisive action and use all means" to fight against the global financial crisis.What's the meaning of sub-loan crisis and the reasons, what are the implications to the United States, China and the global, what's the enlightenment to Chinese real estate finance, asset securitization and financial supervision,these questions led to my thinking. Four parts of this thesis made a research and analysis.In the first part of thesis (Introduction),I summarized domestic and foreign scholars on the question of the research literature, summarized the problem of theoretical and practical significance,and briefly introduce the structure of the thesis, summarizes the main points of view in this article.The second part of Papers is an overview of the sub-prime crisis of the United States. First is an overview of the process of crisis.Second is the meaning of sub-loan crisis of the United States.Finally,it discusses the reasons of United States sub-loan crisis. America's mortgage market can be broadly classified into three levels: the first level are high-quality loan market, Excellent customer of credit score at 660 points, stable and reliable income, reasonable debt burden; the second level are "Alt-A" loan market, Credit Score is at between 620-660; the third level are secondary loan market (Sub-prime Market),people of Credit Score below 620 points, missing proof of income, liabilities heavier,they tend to select more complex, risk-based pricing (Risk Based Pricing) mortgage instrument. The size of the Sub-loan is huge, which developed rapidly, about half were security. U.S. subprime mortgage crisis has generated profound economic background,assets into securities on behalf of the financial instrument has been excessive and indiscriminate use of innovation, resulting in the failure of market mechanism. Asset Securitization refers to asset-backed securities flow in the capital market, which are based on cash flow of specific assets, after specific structural design and credit enhancement.It provides commercial banking and other specialized lending institutions to conduct risk transfer provides a new channel. Commercial banks can be various types of loan securitization, the formation of MBS, ABS, and insurance companies, pension funds and other institutional investors have a higher demand for such fixed-income securities,and at the same time it promoted the collateral debt securities (CDO) development. CDO, refers to the MBS, ABS and other fixed income securities issued by asset-based asset-backed securities. Whether it is cash-based synthetic CDO or CDO, are based on the loan based on the creation of secondary or multiple creation. This provided investment banks, credit rating agencies and other securities intermediary enormous profits spaces. These market intermediaries at reducing its own standards of practice, sell investors these securities , which is complex structures, difficult to identify the risk characteristics. To some extent, this is bound to weaken the market, forming a potential conflict of interest. Throughout the process, hedge funds are the key, because the risk of eventually are borne by. U.S. subprime mortgage crisis has experienced four stages conduction: from the sub-loan crisis of derivatives securities to financial institutions crisis, from financial institutions crisis to financial market crisis triggered by the sharp drop in capital markets,from financial market crisis to entities crisis in the economic. The reasons of the United States sub-loan crisis include the bubble burst of the United States real estate market,continuous interest rate, weakening and loss of the risk management , the risk of moral hazard of the U.S. banking industry.The third part of thesis research and analysis the impact of the United States sub-loan crisis on the United States, China. First of all, the United States are deteriorating real estate market: First, the United States real estate price trend remains in the doldrums; Second, trading volume and starts shrinks. Secondly, the financial markets continues turmoil: by sub-loan crisis, the United States experienced a sharp correction in the stock market; by the Federal Reserve cut interest rates and the impact of economic pessimism, the dollar continued to decline. Third, loss of financial institutions is to expand:Wall Street financial plate is damaged;Holders of subprime mortgage securities companies, asset companies, mutual funds, hedge funds, large banks and insurance companies loss huge. Fourth, market liquidity lacked, credit crunch. Finally, a job market slowdowns, consumption growth may be reversed.To China's influence, in the area of commercial banks and foreign exchange reserves, three firms involved in Subordinated Debt, Chinese overseas M&A appears.Foreign exchange reserve asset faces allocation choices. At the RMB exchange rate and export aspects, it brought the RMB exchange rate system reform steadily worries; China's export slowdown, it is increase of the risk of metastasis of the International Order. On China's capital markets: the political pressures and the impact of international capital. On China's mortgage market, overseas capital into China property market continue to raise the real estate market prices, increasing their risk and foam; Subprime crisis for China's direct impact on the market is relatively small, because China's commercial banks assets is very low degree of securitization.The fourth part of thesis research and analysis the inspiration of United States sub-loan crisis on the Chinese real estate finance, asset securitization and financial supervision.1.The inspiration of United States sub-loan crisis on the Chinese asset securitization: the development of specialized asset securitization law, provide a sound legal environment for asset securitization system; Perfect capital market-building, make great efforts to cultivate institutional investors; According to the characteristics of asset securitization and our bank's practice, the focus of the assets of steady progress in selection; To build up a pool by the market generally accepted and recognized credit rating agencies; Construction of an objective scientific system of credit rating; Separation of the operation of institutional investors and risk regulators; Reduce dependence on bank guarantee;Stock Exchange to strengthen efforts to cultivate the market, to promote asset securitization business;Steady advancement innovation of a variety of financial instruments job including asset securitization; Strengthen the asset securitization products, regulatory issues; In the asset securitization model, the trust While the simple, but a true sale should be more room for development; Guard against the sub-prime crisis may be hidden behind the financial conspiracy.2. The inspiration of United States sub-loan crisis on China's financial supervision.Paper put forward policy recommendations: the development of the financial groups are mixed is a strategic reality choice of China's financial industry; Set up China's financial industry mixed regulatory system; Mixed Group financial capital regulation and risk trade-off must be carried out innovative governance structure; Set up and improve laws and regulations of the development of Mixed financial industry group;Set up a financial regulatory system of dynamic regulatory and check and market constraints; Change the concepts, and to enhance external supervision; Dialectical View of financial innovation, improve the supervision of financial innovation; Take appropriate measures to consolidated supervision and to strengthen cross-border supervision.