1. HW check: Northern Rock Task IV: Vocabulary

2. Northern Rock, RB, p 59-60 SELECTED TERMS 1unsecured debt 2bailout 3on the cheap 4to stem 5to hamper 6covered bonds ato stop bto prevent, hinder cissued with a guarantee (an asset) d at a low cost edebt that is not supported by any assets of a borrower fproviding money to get sb. out of financial trouble

3. Northern Rock, RB, p 59-60 follow-up activity 1eunsecured debt 2fbailout 3don the cheap 4ato stem 5bto hamper 6ccovered bonds ato stop bto prevent, hinder cissued with a guarantee (an asset) d at a low cost edebt that is not supported by any assets of a borrower fproviding money to get sb. out of financial trouble

4. 7run on a bank 8come under pressure 9(borrow) over their heads 10mortgage lender gorganization that makes loans for buying property with the property as security ha sudden demand by many people imore than would be reasonable, intelligent jto feel pushed to act

5. 7hrun on a bank 8jcome under pressure 9i(borrow) over their heads 10g mortgage lender gorganization that makes loans for buying property with the property as security ha sudden demand by many people imore than would be reasonable, intelligent jto feel pushed to act

6. HW: Read Helgas Bar and find out how Helga (with a little help from her friends) ruined a large part of Somelands economy Headings check! Collocations? Questions?

7. Crisis of credit Who is who in the real world? Watch the video to find out! Helga? Unemployed drunks? Beer and wine? Local bank? Drinkbonds? Watch Crisis of credit at: http://vodpod.com/watch/1373851-the-crisis-of-credit-visualized-on-vimeo

8. Crisis of credit Who is who? Helga? Unemployed drunks? Beer and wine? Prices for beer & wine? Local bank? Drinkbonds? Mortgage lender/broker Subprime borrowers Loans for buying houses Interest rates Financial institution CDOs, MBSs

9. Vocabulary focus 1 subprime borrowers A failure to repay a loan 2 credit ratingB investment fund that combines safe & risky investments 3 default C clients who may not be able to repay their loans 4 hedge fund D assets you promise to give if you cannot repay a loan 5 security E estimates of peoples ability to fulfill their financial commitments 6 forecloseF to take possession of ones property because they failed to continue paying a loan

10. Vocabulary focus 1 subprime borrowers C clients who may not be able to repay their loans 2 credit rating E estimates of peoples credit standing ability to fulfill their credit worthinessfinancial commitments 3 default A failure to repay a loan 4 hedge fund B investment fund that combines safe & risky investments 5 security D assets you promise to give to the lender if you cannot repay a loan 6 foreclose F to take possession of ones property because they failed to continue paying a loan

11. Credit crunch credit crunch = credit squeeze = credit crisis: - ________ in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. increase reduction

12. Credit crunch credit crunch = credit squeeze = credit crisis: - ________ in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. increase reduction

13. Credit crunch credit crunch = credit squeeze = credit crisis: - ________ in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. increase reduction Causes: -often caused by a sustained period of ________ and inappropriate lending which results in losses for lending institutions and investors in debt when the loans turn sour and the full extent of bad debts becomes known.debtbad debts careless careful

14. Credit crunch credit crunch = credit squeeze = credit crisis: - ________ in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. increase reduction Causes: -often caused by a sustained period of ________ and inappropriate lending which results in losses for lending institutions and investors in debt when the loans turn sour and the full extent of bad debts becomes known.debtbad debts careless careful Investor in debt?Loan turns sour?

15. How did the subprime crisis lead to the credit crunch/crisis/squeeze? Read: MK, p 75 Put the sentences below in the right order 31 5 24 6 Vocabulary: 1B2C3E 4D 5A

16. Who is to blame? The sharp increase in foreclosures and the problems in the mortgage market were largely blamed on: – loose lending practices –low interest rates –a housing bubble –excessive risk taking by lenders and investors. Should governments rescue banks that have taken too big risks?

17. HW: Watch the Crisis of credit video and answer the questions http://vodpod.com/watch/1373851-the-crisis-of-credit-visualized-on-vimeo Following the tech bubble and the events of September 11, the Federal Reserve stimulated a struggling economy …HOW?... by ________________________________________ WHAT WAS THE RESULT ON THE HOUSING MARKET? _____________________________________________ WHAT WAS THE CONSEQUENCE FOR BORROWERS? ______________________________________________ This left mortgage lenders with property that was worth … HOW MUCH? ______________________________________ WHAT HAPPENED TO SEVERAL LENDERS ______________________________________________ In the wake of the meltdown, …WHAT DID CENTRAL BANKS DO?