Den första uppgiften utgår från End of Chapter Application Case i slutet av kapitel 2, d v s Decisions and Risk Management (!) That Led to the Subprime Mortgage Crisis.
Lektion 1 nästa vecka är handledning kring detta, och på lektion 2 redovisar ni.
Arbeta helst i par, annars går det bra att arbeta enskilt också.
Utgå från Questions for the Case 1-4, men ni behöver inte gå in lika djupt på alla. Gå på djupet på en av dem, eller ta upp alla lite mer ytligt, eller ta en smådjupt och de andra ytligt... Hitta en lagom avvägning.
Det kommer inte att finnas korrekta och felaktiga svar. Det viktiga är att ni visar att ni har tänkt.
1. Apply principles of the intelligence phase of Simon's decision-making model, and discuss major problems that led to the subprime mortgage crisis.
Major problems that led to the subprime mortgage crisis include, but are not limited to the protocols and methods used by the mortgage brokers to apply for loans at banks without proper and harsh rules for downpayments or income verification. Loans were approved that lenders had no way of paying back.
The banks that approved the mortgage loans later sold them to investments banks of Wall Street, who in turn created new security with the mortgages as collateral. These securities were sold to smaller banks, insurance companies etc. Because all mortgages were pooled together, and the general view of the market is that house prices always will rise, the securities were given high ratings by the ratings agencies, and seemed like a very safe investment for buyers.
However, as time tells us the mortgages could not be paid, and the insurance companies were in no condition to pay back the losses of the securities because of its vastness.
And because the mortgages were transfered to shell companies located in places such as Cayman Island, no balance sheets needed to be disclosed, and investors alike could not have the transparency needed in order to decide wether this was a sane investment or not.
2. Given what has already taken place, reapply the intelligence phase principles to determine the current state of the problem
The current economic climate
3. What can you recommend about the crisis now? Apply design and choice phase principles to guide you
Given that the major problems in history seems to be the lack of control and regulations on mortgage loans, and the lack of transparency and openness in financial institutions reporting
4. What issues will you have to keep in mind as you move your proposed solutions to implementation?