• Sub Prime Crisis 2008 – 4

    Long term effect and recession

    After incurring huge losses in the sub prime mortgage lending section, Government has bailed out AIG and the bigUSbanks with the tax payer’s money. Merrill Lynch was sold to Bank of America at throw away price of USD 50 million and Lehman Brothers’ collapse wiping out whopping USD 700 billion from the world financial market. Lots of investors and banks across the world lost money in the crisis and the liquidity crisis did continue for almost 2 years making it one of the worst financial crises in the history. The sub prime crisis also led to the recession for theUSand global economy as well.

    Some facts about the sub prime crisis

    • It had led to US and all the developed countries into recession, while for the developing countries the growth dropped significantly.
    • Huge number of global banks and companies had filed for bankruptcy.
    • Global investors suffered a loss of USD 8 trillion because of stock market crash and write downs.
    • USinvestment banks Bear Stearns and Merrill Lynch was sold at throw away prices.
    • US Government had bailed out some big banks like Goldman Sachs, Morgan Stanley and Citibank and the insurance giant AIG.

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