Financial Crisis 2007-2009

Business Communication Presentation

Prepared by :Ayham Mass’adehRami Ismaeel

Introduction

A Financial Crisis is a situation when money demand quickly rises relative to money supply.

Introduction

• Which is also known as: Credit crisis, Subprime Mortgage Crisis and Real Estate Crisis.

Why it is very significant?

• Worst financial crisis since the Great Depression of the 1930s

• Total cost of the crisis to US economy $600 billion

• The projected rescue plan will cost $1 trillion

Previous Financial Crises

Overend & Gurney in 1866 and Barings in 1890

The Great Depression of 1930

The oil crisis 1973

The Crash of 1987

The Dot.com Crash in 2001

Reasons behind The Financial Crises

Formulation of “The Financial Crisis Inquiry Commission”

A final report is due to the Congress on December 15, 2010

Reasons behind The Financial Crises

• Houses prices declined sharply 2006 • Easy credit conditions• Financial Innovations• Deregulation

Effects

•Failure of key businesses

•Decline in consumer wealth

•Significant decline in economic activity

•Decline in trust in the whole financial system

Effects•L

ess availability in loans

•Lower rates of return on personal investments

•Reduced level of government spending

•Higher unemployment rate

Effects on the US Economy

$75 billion so far on subprime debt alone

Estimates suggest that total subprime losses may be more than $300 billion

Effects on the US Economy

Effects on the local Economy

Impact on the Jordanian market is less severe

Jordan's economy has the ability to achieve a growth rate compared to the US growth rate

Jordan’s banking system enjoys a high degree of liquidity

Effects on the Global Economy

• There is global slow down in economic growth

• Reduced demand has led to price deflations in other sectors

2006 2007 2008 20090.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

5.1% 5.0%

3.9%3.0%

7.9% 8.0%

6.9% 6.1%

3.0%2.6%

1.5%0.5%

World

Emerging & Developing

Advanced

Gro

wth

Ra

te

%

Years

Response to Financial Crises

• U.S. government buys assets worth (700) billion dollars related to mortgage

• The US acquired shares in the companies benefiting from this plan

• Raise the ceiling on guarantees to depositors • Grant tax exemptions worth about $100

billion• Interfere of the compensation granted to

heads of companies

Response to the Financial Crises Locally

• Several defensive measures had been taken by the Jordanian government to maintain monetary stability and to create an sustainable economic growth rates.

Jordan corrective & Preventive action taken

• Reduction of interest rate 3 times in 2009

• Issued new temporary regulations to ease credit requirements

• Lowered the Required Reserves for the local Banks

• Guarantee all deposits in the Jordanian banks until the end of 2010

Key lessons of the financial crisis

• Globalization Effect

• Central banks role

• Regulations

Brands in the Crises

Brands in the Crises

Q & A

References1. Auer, P. & Wehrmüller, S. (November, 21, 2008). Assessing the impact of the

financial crisis on the US labour market. Retrieved (Dec, 23, 2009) from http://www.voxeu.org/index.php?q=node/2603. 

2. BBC website. (2007). Financial crises: Lessons from history. Retrieved (Dec, 15, 2009) from http://news.bbc.co.uk/2/hi/ business/6958091.stm.

3. Badaracco, R.(2009). Reasons For the Financial Crisis. Retrieved (Dec, 15, 2009) from http://ezinearticles.com/?Reasons-For-the-Financial-Crisis&id=1694865 .

4. Central Bank of Jordan. (2009) various reports and announcements. Retrieved (December, 23, 2009). from http://cbj.gov.jo .

5. Gerald, k. (2009). Three Ways to Know When the Credit Crisis Hits Bottom. The Money Map Report. Retrieved December, 18, 2009, Money morning .com.

6. Laitman, M. (October, 17, 2008) The Financial Crisis – an Analysis. Retrieved (Dec, 15, 2009) from http://www.laitman.com/2008/10/the-financial-crisis-an-analysis 

7. Moneycafe (December, 16, 2009) Prime Rate Retrieved (Dec, 23, 2009) from http://www.moneycafe.com/library/primerate.htm.

Thank you