No one wanted to get caught with bad debt on their books at the end of 2007. The company still had not secured a significant capital infusion nor found a ready buyer.IndyMac reported that the bank's risk-based capital was only $47 million above the minimum required for this 10% mark. By using The Balance, you accept our

A big cause of sudden market swings is the unknown effects of  Limitations of default and prepayment models, the heart of pricing models, led to overvaluation of mortgage and asset-backed products and their derivatives by originators, securitizers, broker-dealers, rating-agencies, insurance underwriters and the vast majority of investors (with the exception of certain hedge funds).For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its effect on the overall stability of the financial system.The Commission concludes AIG failed and was rescued by the government primarily because its enormous sales of credit default swaps were made without putting up the initial collateral, setting aside capital reserves, or hedging its exposure—a profound failure in corporate governance, particularly its risk management practices.

Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. March 5 - The Dow dropped to 6,594.44. It was a total decline of 53.4% from its … They assumed homeowners would refinance.

That was better than May's forecast of a low of $213,400 in the first quarter of 2008. It signaled an about-face in the Fed’s policy. Banks wouldn’t accept a house as collateral if it were lower in value than the loan.

For example, an article in Karim Abadir, based on his work with Gabriel Talmain,There were other economists that did warn of a pending crisis.The first visible institution to run into trouble in the United States was the Southern California–based IndyMac Bank was founded as Countrywide Mortgage Investment in 1985 by The primary causes of its failure were largely associated with its business strategy of originating and securitizing IndyMac's aggressive growth strategy, use of Alt-A and other nontraditional loan products, insufficient underwriting, credit concentrations in residential real estate in the IndyMac often made loans without verification of the borrower's income or assets, and to borrowers with poor credit histories.

In comparison, the total assets of the top five bank holding companies in the United States at that point were just over $6 trillion, and total assets of the entire banking system were about $10 trillion.

Loans at first required full documentation, then low documentation, then no documentation. On April 11, 2007, the Federal Reserve released the minutes of the March  AIG's failure was possible because of the sweeping deregulation of over-the-counter (OTC) derivatives, including credit default swaps, which effectively eliminated federal and state regulation of these products, including capital and margin requirements that would have lessened the likelihood of AIG's failure.The limitations of a widely used financial model also were not properly understood.Then the model fell apart. While many banks are obviously at the brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. On February 26, former Federal Reserve Chairman Alan Greenspan warned that a recession was possible later in 2007. Companies will hold off making purchases if they aren't confident in the economy. The price slump lasted until 2004, when a price surge pushed copper to $7,040 per ton in 2008.Nickel prices boomed in the late 1990s, then declined from around $51,000 /£36,700 per metric ton in May 2007 to about $11,550/£8,300 per metric ton in January 2009.

Some said it was because the Federal Reserve had just raised the fed funds rate to 5.25%. In the case of businesses, their creditworthiness depends on their future profits.

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