Bear Stearns Breakdown
The investment bank that collapsed in 2008, marking the start of major financial turmoil
What is Bear sterns
This financial product bundles home loans together and sells them to investors.
What is MBS
This term describes borrowing to invest, a practice that led to Bear Stearns' downfall.
What is leverage?
Bear Stearns' executives were not upfront about how risky their assets were. This is an example of what?
What is lack of transparency?
This major bank acquired Bear Stearns.
What is JPMorgan Chase?
This term describes the rapid increase in housing prices.
What is the housing market boom?
An institution that gave ratings to risky securities.
What are credit rating agencies?
IB pushed risky securities without telling clients the truth about their danger. This is an example of what?
What is conflict of interest?
The financial ratio compares a company's debt to its equity, showing how much it is relying on borrowed money.
What is leverage ratio?
A financial product that combines different types of debt that investors could invest in.
What is CDO?
Bear Stearns had this leverage ratio in November 2007 according to FCIC.
What is 38 to 1?
Even after Bear Stearns’ actions contributed to millions losing their homes and jobs, not a single executive faced legal punishment. This raises ethical questions about the lack of what?
What is Accountability?
This term describes when too many customers withdraw money, fearing the bank will fail.
What is a bank run?
Many banks approved mortgage to people who could not afford them, using this justification.
What is expecting housing price to keep rising?
A financial instrument used to insure against defaults on risky securities.
What is CDS?
Occurs when a person or an entity participates in risky practices based on the expectation that another person or entity will take the brunt of the cost when an unfavorable outcome occurs
What is Moral Hazard?
Bear Stearns lost this much in liquidity in only over two days when counterparties and clients lost confidence in the company.
What is $17 billion?
This factor led to a surge in home prices as demand exceeded supply.
What is easy credit or low interest rates?
Bear Stearns had a notional amount of this much in CDS.
What is $2.25 trillion?
This accounting trick makes company's leverage ratio looks better than they actually are, often used before reporting periods.
What is window dressing?