Project: Credit Crisis

Your group project is to research the subprime difficulties that led to the subsequent credit crisis of 2008 and current economic situation. There are many elements to the subprime situation that require understanding if current economic conditions are to be understood. I am looking for a comprehensive report on the subprime crisis and the current state of the economy. A comprehensive report is one that explains the history of the subprime era, beginning with the extension of subprime loans and ending with the current state of our economy. As such, your group should consider the following issues:

1. What is a subprime loan? How do subprime loans differ from standard loans? Be specific.

2. How do lending standards for subprime loans differ from standard loans?

3. Why were subprime loans extended by mortgage lenders given the high credit risk?

4. What triggered the defaults of subprime loans? In other words, what conditions in the economy began the process of defaults in the subprime market?

5. What are mortgage backed securities? How are they relevant to the subprime meltdown?

6. What sectors were affected by subprime defaults? (i.e., Banks?, Mutal funds?, Hedge funds?, Who? Explain). How were these institutions affected?

7. Explain how the subprime mess lead to a credit crisis. That is, why have defaults in the subprime market reduced credit in the financial markets?

8. Select a financial institution that had serious financial problems as a result of the credit crisis. Determine the main underlying causes of the problems experienced by that financial institution. Explain how these problems might have been avoided.

9. What actions has the Federal Reserve taken? What is the Federal Reserve is trying to accomplish?