Wall Street 2 (Day 3)

• Take Handout

• Take out notebook – Write down How did this start?

• You will Understand how events from 1980’s to 2006 led to crash and the role of individuals and companies in the crisis.

How did this happen?

• 1980’s -90’s Bull Market (investors expect INCREASE in profits)

• 2000-2006 – Bear Market (investors expect DECREASE in profits)

• ENRON (falsely reported earnings $90.00 a share to $1.00)

• Bernie Madoff: reading• Housing Market: prior to 2006 bubble• It could also be described as a trade in products

or assets with inflated values.

How did this start?

• 2006 – US Banking Industry subprime loans

• Subprime: loaning to borrowers with high interest – bad credit = profitable to banks.

• ¼ all mortgages in US subprime• Can’t repay (default) – foreclose –

bankruptcy • Bailout: 700 Million 2006 to: banks, auto

makers, Wall Street financial firms

Bernie Madoff:

American former stockbroker, investment advisor, Chairman of NASDAQ second-largest stock market

and the admitted operator of a Ponzi Scheme that is considered to be the largest financial fraud in

U.S. history.

Ponzi Scheme

• A Ponzi scheme are fraudulent investments that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.

• The Ponzi scheme entices new investors by offering higher returns than other investments, abnormally high or unusually consistent.