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Citigroup And The Government Preferred Stake - School Essays

Citigroup And The Government Preferred Stake

Part I: The Financial Crisis

The subprime crisis or what has been called the "Financial Crisis" is defined in the dictionaries as: A situation in which the supply of money is outpaced by the demand for money. This means that liquidity is quickly evaporated because available money is withdrawn from banks (called a run), forcing banks either to sell other investments to make up for the shortfall or to collapse.

More specifically, economists called it Credit Crisis and have another definition: A crisis that occurs when several financial institutions issue or are sold high-risk loans that start to default. As borrowers default on their loans, the financial institutions that issued the ...

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adjusted based on a variety of indices.

2. Securitization: A process of standardizing contractual terms which allows a loan to be packaged with other contracts and sold as a diversified bundle to passive investors. Or we can simply say: Cash flows from the bundle are carved up into different securities, differing in liquidity, maturity, contingency, and risk, each of which appeals to a particular clientele.

3. Inaccurate Credit ratings: Credit Rating Agency (CRA) :A company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves, and that create a problem of interest conflicts.

4. Government Policies: The US government has separated the between commercial banking (Deposit taking) and the Investment banking (Securities) industries. Also, the government lost regulation in securities industries leading to excessive risk taking.

Part II: Citigroup Incorporation

Citigroup Inc., a global financial services ...

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PAPER DETAILS

Added: 6/6/2011 09:36:04 AM
Submitted By: SarahAlBalooshi
Category: Business
Type: Premium Paper
Words: 1060
Pages: 4

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