Wonderland Productions

in association with SubPrime

presents You

The Subprime Crisisalmost a Modern Fairytale

Directed by Thomas Wicki

Private Real Estate Purchaser

Broker Subprime Lenders Wholesellers

Investment Banks Rating

AgenciesInvestors

STARRING:

A lot of Money Subprime Mortgages

CDO’s

MBS

Investment Products

Increasing Housing Prices

Decreasing Housing Prices

CO-STARRING:

Once upon a time there was a Wonderland where….

…..Housing Prices were increasing…..

….and more and more money was available

Some smart people in Wonderland invented a Money Making System which worked in the following way:

The Subprime Lender raise a lot of money which….

Subprime Lenders

Broker Private Real Estate Purchaser

…via their Broker goes to hardworking people who suddenly can buy a house

Private Real Estate Purchaser

These hardworking people are very happy because they never thought they can buy a house…..

…but thanks to the Money Making System of the Wonderland they now have their own house!

Subprime Lenders

The Subprime Lenders are very smart guys, they don’t want to have the risks of the mortgages they are giving….

Subprime Mortgages

….that’s why they are selling the mortgages to a Wholeseller

Wholesellers

But the Wholesellers are also smart guys and are selling the mortgages to the Investment Banks……

Subprime Mortgages

….who are buying all kinds of mortgages they can get!

Wholesellers

Investment Banks

The Investment Banks have the smartest guys and they have the great idea to create new products….

….which are called Collateral Debt Obligations (CDO’s) or Mortgage Backed Securities (MBS)

Investment Banks

CDO’s

MBS

Investment Products

CDO’s or MBS are basically a basket of different mortgages of different credit ratings Investment

Banks

CDO’s

MBS

Investment Products

Thanks to the Rating Agencies the new products get really good ratings….. Investment

Banks

CDO’s

MBS

Investment Products

Rating Agencies

AAA

…And because of the good ratings banks can now sell these products to all kinds of investors. Investment

Banks

CDO’s

MBS

Investment ProductsInvestors

Buying

High Return

And so a system was created in which everyone was very happy……

Private Real Estate Purchaser

BrokerSubprime Lenders

Wholesellers

Investment Banks

Rating Agencies

Investors

Mortgages

CDO’s

MBS

Money/ Commissi

onMoney

Mortgages

Money/ Commissi

on

Mortgages

Money/ Commissi

on

Mortgages

Commission

AAAMoney/ Commissi

on

The Money Making System:

…Because as long as the system is working everyone earns good money!

Unfortunately the conditions start to change…..

The Housing Prices are falling dramatically

A real storm hits Wonderland…..

….destroying the so wonderfully working Money Making System.

The citizens of Wonderland are now losing a lot of money and getting very unhappy!

The storm hits Wonderland much harder than anyone would expect…..

….and shakes Wonderland to its very foundations.

However, like after every storm, the sun will once again shine over Wonderland…. but the citizens of Wonderland have to realize that the promising dream of the Money Making System is a dream too good to be true…

.... and only hard work will make them live Happily Ever After.

If this story would have been told two years ago it certainly would have been hold as a fairytale. No one could imagine that such a crisis was possible.

Unfortunately this fairytale turned into reality and we experience one of the most severe financial crisis since 1929.

The crisis will go over and the economy, housing prices and stock markets will start to rise again. However, the end of one crisis is the beginning of the next one.

Unless a lesson will be learnt…..

THE END