Ren Pingsheng, Jiang Qiurong and Zhang Wenwu sat in the conference room of the New York branch of Hanhai Bank to discuss Ren Pingsheng's next plan.

"Why is this year crucial?"

This is Jiang Qiurong's question, and it is also Zhang Wenwu's concern, although they have all seen Ren Pingsheng analyze the reasons for his actions, but today's Ren Pingsheng is particularly different, he is much more serious than usual, and his eyes are much more solemn.

Facing Jiang Qiurong's puzzled eyes, Ren Pingsheng did not answer directly, but picked up the remote control and turned on the LCD TV in the conference room.

On the TV screen, CNN news is scrolling to broadcast the latest situation in the U.S. economy and market, and the straight-clad and upright-looking host preaches in standard American English:

"UK Parliament Approves Nationalisation of Northumbur Rock Bank, Fed Chair Ben Bernanke Claims to Cut Interest Rates Even If Inflation Accelerates......"

Ren Pingsheng raised his chin at the TV screen and said in a deep voice:

"Do you see the crisis?"

Jiang Qiurong looked at the CNN news, raised her two slender eyebrows, and said with a confused expression on her face:

"Although the U.S. stock market has entered a consolidation phase and the real estate market has also been sluggish, the U.S. economy is still stable and improving, where do you see the crisis?"

Ren Pingsheng pointed to the scrolling news below CNN and said:

"Look. ”

The rolling news is that the Fed has announced two new measures to increase liquidity, a regular tender tool and a decision to start a series of regular repo transactions.

Jiang Qiurong's pair of slender phoenix eyes narrowed, and she said slowly:

"Since last year, the Federal Reserve has cut interest rates three times in a row, changing the practice of continuous interest rate hikes after the bursting of the Internet bubble, which shows that there is a shortage of funds and the danger of insufficient liquidity in the current market. ”

Ren Pingsheng nodded and asked rhetorically:

"Why is there a lack of liquidity in the market?"

Jiang Qiurong held a fountain pen in her hand, turned it gently, and said thoughtfully:

"The reason for the lack of liquidity, in addition to the monetary tightening, is that major financial institutions are withdrawing funds and reducing loans and capital expenditures to meet regulatory contract requirements. ”

Ren Pingsheng continued to ask:

"Why do financial institutions need to withdraw funds?"

Seeing that Jiang Qiurong hadn't understood yet, Ren Pingsheng said step by step:

"If everything is normal in the economy, we should continue to borrow and continue to put money into society. ”

Jiang Qiurong's two slender eyebrows frowned, and she muttered:

"Yes, could it be that there is a systemic crisis in the financial institutions themselves? ”

“BINGO！”

Ren Pingsheng clapped his hands lightly, he stood up and handed out a few printed materials to the two of them.

Jiang Qiurong and Zhang Wenwu invariably picked up the stack of printing materials and looked at them seriously, and the more they looked at them, the more serious their faces became.

The paper simply printed a few lines of information, which read as follows:

On February 13, 2007, New Century Financial Corporation issued a profit warning for the fourth quarter of 2006, and HSBC Holdings' housing loan business increased its bad debt provision by US$1.8 billion.

On April 4, 2007, New Century Financial Corporation filed for bankruptcy protection;

On April 24, 2007, existing home sales in the United States fell by 8.4% in March;

On July 19, 2007, Bear Stearns, the fifth-largest investment bank on Wall Street, was on the verge of collapse, losing money for the first time in its 83-year history.

On 1 August 2007, Macquarie Bank announced that investors in its two high-yield funds faced a 25% loss;

On August 6, 2007, the U.S. Residential Mortgage Investment Corporation, the 10th largest mortgage service provider in the United States, filed for bankruptcy protection;

On November 28, 2007, the National Association of Realtors claimed that existing home sales fell for the eighth consecutive month in October;

On January 17, 2008, the number of new housing starts in the United States fell by 14.2% in December 2007 to an annual rate of 1.006 million, the lowest in 16 years;

......

This piece of paper records in detail from 2007 to 2008, the major news of the U.S. real estate market and real estate-related industries, some of which are searched by Ren Pingsheng's memory bank, and the rest are collected by Ren Pingsheng from major media during this period, which can be sorted into such a fine and professional schedule, which shows that Ren Pingsheng attaches great importance to the U.S. market.

Jiang Qiurong took this piece of paper and said with some emotion:

"Although I often read the financial news and know that there are many difficulties in the US real estate market at the moment, I did not expect the crisis to be so serious. ”

Ren Pingsheng smiled and took the paper and said:

"That's right, it's the subprime mortgage crisis. “

Jiang Qiurong herself is in finance, and she is no stranger to this word, Zhang Wenwu didn't understand it very much, he lifted his glasses and asked:

"What is the subprime mortgage crisis. ”

Ren Pingsheng looked at Jiang Qiurong, Jiang Qiurong nodded slightly, and explained to Zhang Wenwu:

"The subprime mortgage crisis is the dramatic volatility in the U.S. subprime mortgage bond market, which directly affects transactions in the U.S. real estate market and the financial institutions that invest in the real estate market and related securities. ”

Although Zhang Wenwu also studied finance at NYU, his knowledge reserve is limited to books, and he does not know much about the specific operations in the market.

Jiang Qiurong wanted to show her skills in front of Ren Pingsheng, so she patiently introduced it.

"First of all, any real estate development is inseparable from loans, and personal home purchases are inseparable from mortgage loans. Mortgage loans issued by banks and other financial institutions are divided into a series of grades according to the applicant's credit level and ability to repay debts, with a high and stable income, such as a glamorous Wall Street bachelor, and a grocery store with a relatively low credit rating without a stable income.

"For customers with high credit ratings, the interest rate on the loan given by the bank is low, which means the risk premium is lower. For customers with low credit ratings, banks do not issue loans or charge higher interest rates, require guarantors, etc., that is, the risk premium is high. Loans issued to customers with low credit ratings and weak solvency are called subprime mortgages. It is characterized by high risk, high risk premium, and higher returns than general bonds. ”

Ren Pingsheng nodded approvingly at Jiang Qiurong, but then he raised his voice and said:

"If the bank just makes mortgages, or even just subprime mortgages, it's not enough to cause a crisis, it's MBS that really triggers the subprime crisis. ”

Looking at Zhang Wenwu's confused eyes, Jiang Qiurong continued to explain:

"MBS, Mortgage Backed Security, is a mortgage-backed bond, which is a product of mortgage securitization. After the bank issues the mortgage loan, it holds a batch of mortgage loan contracts, which will regularly bring a certain amount of cash flow to the bank, that is, the repayment of the loan to the buyer, but these loan contracts cannot be flowed, that is, they cannot be traded in the securities market. “

"Assets that can't be traded are dead assets, but banking is a profit-seeking industry, and they will do whatever it takes to get assets flowing. Some of Wall Street's savvy bankers invented MBS, where banks package and package these subprime loans, and then split them into three tiers for sale, preordinated, sub-primed, and subordinated. Each time the loan is recovered, the priority income is guaranteed first, the second priority is satisfied after the priority income is satisfied, and finally the subordinate. “

"So the priority has the lowest expected return and the lowest risk, and the secondary has the highest expected return and the most risk. MBS will give buyers a certain amount of returns on a regular basis, and it is also a structured fixed income product. In addition, in addition to the grading structure, credit rating agencies have also played a role in boosting MBS's credit rating and making MBS more recognized by the market. ”

Looking at Zhang Wenwu's curious eyes, Jiang Qiurong added:

"In layman's terms, you can't buy other people's loan contracts when you go to the bank, you can only buy the bank's wealth management products, and MBS can be regarded as a wealth management product. ”

Ren Pingsheng slapped the table lightly, stood up and said:

"MBS is the source of this crisis. “