Financial Markets and Institutions

FIN 4303 – RVE

Financial Markets and Institutions

Spring 2019

Group Project – Research Paper

Your team is an independent panel hired by the Chairman of the Finance Committee of the House and Senate to investigate the Subprime Mortgage Crisis and its aftermath. In 10 weeks, you will report your findings to the Committee.

The written report to the Committee is to include:

Part I (50%)

1. Summarize the subprime mortgage crisis and its aftermath in a chronological format, highlighting only significant events that occurred. Be sure to include the starting point, as you see it.

2. Outline the role that each party played in the subprime mortgage crisis. Identify the names of the companies that played a major role and briefly provide an update of their present status:

a. Mortgage companies/ brokers

b. Subprime borrowers

c. “Money center” banks

d. Investment bankers

e. Mortgage credit insurers (Freddie Mac, Fannie Mae, Ginnie Mae)

f. Credit rating agencies (the big 3)

g. Investors (Pension funds, hedge funds, global investors)

3. Identify the winners and losers from this financial event. Clearly state your reasons.

4. Describe the magnitude of the effects to the national and international economy, through data and statistics, and present your opinions about whether AIG should have been allowed to fail.

Part II (50%)

1. Summarize the actions already taken until now by the Federal Reserve and Federal Government to ease the credit crisis.

2. Based on your research and your knowledge of the current economic environment, forecast economic growth and the direction of interest rates in the following one year and outline a series of recommendations for the Finance Committee to consider to control the effects of the financial crisis and avoid an occurrence in the future. Specify which ones you believe would be the most effective. Consider practicality, timeless, cost, timeframe and effect of implementation.

Recommendations could cover governmental policy or action, monetary policy, regulatory, and private industry.

3. The Ethics Committee also wants the panel to identify which parties should be investigated for potential ethics violations and the potential role they played that would be considered unethical behavior during the credit crisis. Begin with a definition of ethical standards in business.

4. This crisis is the most serious economic crisis in the world history. European countries also suffer another wave of financial crisis. Summarize what the European debt crisis is and how would the European debt crisis play out? What really caused the Eurozone crisis? Are Americans responsible for European woes?

The written report is due on April 24 at 2:00 PM. Groups are required to electronically submit a copy of your report using Canvas Course Mail. The report must be presented in professional manner and must be submitted before deadline. Late project will be assessed a penalty of 10% points per day. Each group will be responsible for submitting only ONE document, rather than submitting individually.

When you prepare your report, you should follow these rules and guidelines:

1. The report must be prepared with a word processor and consist of summaries and recommendations for Part I and Part II listed above. 15 to 20 double-spaced pages would be sufficient to meet my expectation. The maximum allowed length is 20 pages (not counting the title page and bibliography). The margins of your report should be 1" on all sides. Use 12-point font. Each page of the body of your report must have a footer that indicates your group number and page number. You should understand that your grade is a function of the quality of your work and not the number of pages you write.

THE MAXIMUM PAGE LIMIT WILL BE RIGOUROUSLY ENFORCED.

2. Your recommendations for Part II (solutions to the financial crisis) and analyses for other questions should be informative which gives someone insight. Both parts (Part I and II) count equally toward the research paper grade. If you want to use tables and figures to support your arguments, make sure that these tables and figures have a title. Readers of your report should be able to understand what is presented in the tables or figures without referring to the text. You can include footnotes in your tables and figures to indicate data sources or to explain the definition of variables. Your graphs must be of high-quality.