Chapter 1670: The Cause of the Crisis (2/10)

At this time, the mortgage finance company market in the United States has shown some crises, but they have all been resolved by the US government. How did they resolve it? Very simple, adjust the interest rate.

Since last year, the Federal Reserve has continuously adjusted interest rates and kept rising. From one percent, it rose to five and a half percent.

A rise in interest rates means that the income of these mortgage finance companies has risen, and the mortgage income of banks has risen, but the pressure on those who repay the loan has increased several times.

The loan interest rate is normally higher than the deposit interest rate, which is also one of the main sources of bank income, deposits and lending.

And what does rising interest rates mean? It means that those who could normally repay the mortgage, now can't afford it.

The intervention of those mortgage finance companies has given many Americans the opportunity to buy a house, allowing them to buy a house with a loan even if their credit is not enough and their repayment ability is worrying.

And there is another mode, that is, the principal repayment is the same every month, but the interest is adjusted according to the adjustment of the bank.

Then, when the bank's interest rate has been raised several times, the interest that many people have to repay has also been raised several times, which greatly increases their burden.

Some people who could afford to pay back their loans in the past can't afford to pay back now. House prices used to rise rapidly, so even if these people couldn't repay their loans, the company could still auction off the house without losing money, and the customers didn't lose money either.

However, the rate of increase in housing prices is not as fast as that of interest rates, which means that customers are now losing money, and mortgage finance companies are also losing money.

It was also under such circumstances that the U.S. government decided to ask the Federal Reserve to cut interest rates. Although the Federal Reserve is not a political axe, it still has a certain influence.

It's a pity that it's too late, and many loans have become bad debts.

As the second subprime loan company in the United States, New Century Financial Corporation, has issued too many loans. And in order to promote efficiency, they issued loans to many people who did not meet the regulations at all, and some collaterals were even double-mortgaged.

The income of many people should not be able to make a successful loan at all. You earn 1,000 US dollars a month and you have to repay more than 900 US dollars. It seems that you are still rich, but a normal loan requires an income that exceeds twice the repayment amount. The above is safer. And the remaining money must be enough for the other party to live on.

How to live with dozens of dollars left over a month? Let alone a country with a highly developed economy like the United States, even in some countries with an average economy, it is not enough, and the prices are there.

But many people still can't pay the money, New Century Financial Company thought of a "good way", that is to change the loan model. You can choose the loan method again, and the repayment method will naturally change. In this way, the problem of repayment difficulties for many people can be solved.

But this is only a temporary solution, not the root cause, and even belongs to drinking poison to quench thirst. As a result, the New Century Financial Company suffered even more losses.

New Century Financial Corporation is also a very fast-growing company. It was established in 1995 and went public in 1997. The Asian financial turmoil in 1998 affected the world, especially the collapse of the real estate bubble in Asia, which hit the United States again.

But at that time, New Century Financial Corporation was not large in scale, successfully avoided this risk, and then developed even faster.

After Xiao Bushi came up with this housing plan, most of the real estate finance companies have achieved rapid development, and the stock prices of many companies have also risen rapidly.

However, in 2002, Feng Yu triggered the Internet bubble in the United States in advance, especially exposing the fake account methods of companies such as WorldCom and Enron, which made the entire US stock market,

Even the global stock markets have been hit hard, and have not recovered for several years.

At that time, New Century Financial Corporation developed even faster. However, at the same time, the two Fangfang Group also broke out the fake account scandal.

But what is interesting is that the scandal of the two rooms is not that they overreported their profits, but that they underreported their profits!

At that time, the profits of real estate were very high, and the two groups also made a lot of money. However, these two companies concealed a lot of profits in order to pay less money, pay less taxes and other reasons.

This sends a signal to many people that the real estate finance industry is too profitable now, and after concealing profits, they still make so much money. As a result, more and more people began to enter the field of real estate finance, hoping to make more money.

It was also at this time that the stock price of New Century Financial Corporation inevitably fell, but the decision-makers of this company believed that the market underestimated their stock price, and then they teamed up with several companies with the same subprime loans to let They have become real estate investment trust companies, hoping to attract more investors with higher dividends.

Simply put, this New Century Financial Company doesn't have much money at all.

But they dared to lend money, and the censorship was extremely low, and even the re-examination was just a formality, so that the amount of their loans expanded rapidly, and the surface was very prosperous.

Bank lending requires you to go to the bank to handle it, and most of them need to queue up and review things, which is very complicated. But at New World Financial Corporation, there is no need for these processes at all.

They all use brokers, and even many brokers don’t even have an office, they just work in their own homes. As long as they make a phone call, the brokers will come to serve them. They are meticulous and considerate than banks.

The same is true for New Century Financial Corporation, which has rapidly grown into the second largest subprime mortgage company in the United States. In a little over ten years, the company's market value has soared from one million US dollars to more than three billion US dollars!

This company is also very lenient for brokers. Many brokers' paid vacations can last up to half a year, and even many executives are included.

Under this kind of operation, the hidden dangers of New Century Financial Company are getting bigger and bigger. Many people simply cheat ~ loans, and the company's bad debts and bad debts are also increasing.

The company's financial audit company has already discovered these problems, but they have always chosen to hide it. Once the shareholders know that the company has lost so much money, the company will be doomed.

This kind of financial loan company should have sufficient cash reserves, but this company doesn't have it at all. So as long as this news is released, the result is doomed.

Feng Yu looked at the information that Ralph handed him, and he didn't expect that the company was short of funds, which was more than he imagined. And it's not just the New Century Financial Company, there are many companies in the same company, all of which are in the same situation.

Feng Yu put down the information: "Ralph, tell them, the plan can start!"

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