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US Interest Rate Reset to 1.75% (Effects (Search for investment…
US Interest Rate Reset to 1.75%
Effects
Search for investment substitutions
Investment in the housing market
Mortgages
Loans
Lower interest rates= high demand
Creation of Collateralized debt packages that included Credit Default Swaps (CDS) in order to make the offer look more attractive
Housing market value and price increase due to increase demand
Loans given out by banks
Subprime mortgages
Houses put up for sale from lack of money supply for owners
Banks lack of money and resources to pay back loans
Bankruptcy filed
House supply increase lowering demand and value of houses
Causes
Mortgage owners taking advantage of lower interest rates
Federal reserve lowering of interest rates by federal reserve to restore confidence in the markets
Manager of hedge funds pressure to perform
Hudge funds promise above average returns
Unable to fulfill the wishes of investors due to the current economic climate/situation
Lack in spending and investing
US Economic Resession
Poor economic performance and unconfidence in markets
Dot Com bubble burst
911 Terror Attack
Lowered interest rates to stop unemployment and promote stability
Federal reserve used to patch up crisis, used as a bandaid
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Stimulation of housing markets
Investors loss in confidence in market
Job loss
Price fall