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107-651: In 2022, the bank won the “World’s Best Bank Transformation” award by Euromoney trade magazine. For the third year in a row, The bank was awarded as " Best Performing Bank " in Germany by The Banker . The bank changed its name from HSH Nordbank to Hamburg Commercial Bank (HCOB) on February 4, 2019, after the bank was sold to new owners in 2018. HCOB has foreign offices in Athens and other significant operations in Luxembourg and London . HSH Nordbank, then HCOB has been designated as

214-515: A Significant Institution since the entry into force of European Banking Supervision in late 2014, and as a consequence is directly supervised by the European Central Bank . HSH Nordbank was created as a result of a merger between Hamburgische Landesbank and Landesbank Schleswig-Holstein on June 2, 2003. In the course of the merger HSH was transformed into a joint-stock company ( Aktiengesellschaft ) and thereby formally privatised, i.e.

321-556: A bailout in March 2016 and HSH asked investment bank UBS to find buyers for the loans which were extended to shipping and aircraft companies and for real estate and renewable energy projects. In an initial deal, Macquarie Bank and Merrill Lynch bought 800 million euros in aviation loans and 540 million euros in real estate credits, respectively. In 2013, HSH announced that it was taking provisions of 127 million euros in relation to illegal securities transactions, cum-ex dividend trades, after

428-592: A bid for the bank. By the end of the year, bids were submitted by Apollo, Socrates and a consortium of private equity groups Cerberus Capital Management and J.C. Flowers . In February 2018, the state governments of Schleswig-Holstein and Hamburg – at the time led by Daniel Günther and Olaf Scholz – agreed to sell their shares for an estimated 1 billion euros to a group of private equity investors led by Cerberus and JC Flowers. Other funds involved were GoldenTree Asset Management and Centaurus . In addition, Austrian bank BAWAG also contributed. The transaction also saw

535-628: A climax with the bankruptcy of Lehman Brothers on September 15, 2008, and a subsequent international banking crisis . The prerequisites for the crisis were complex. During the 1990s, the U.S. Congress had passed legislation intended to expand affordable housing through looser financing. In 1999, parts of the Glass–Steagall legislation (passed in 1933) were repealed , permitting institutions to mix low-risk operations, such as commercial banking and insurance , with higher-risk operations such as investment banking and proprietary trading . As

642-655: A country (such as the US) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the U.S. to finance its imports. All of this created demand for various types of financial assets, raising the prices of those assets while lowering interest rates. Foreign investors had these funds to lend either because they had very high personal savings rates (as high as 40% in China) or because of high oil prices. Ben Bernanke referred to this as

749-574: A direct consequence the CEO Hans Berger stepped down and in the following weeks HSH announced extensive restructuring. Branches in Copenhagen and Hong Kong were reduced to representations and new business was focused on the core region in northern Germany. In December 2008, HSH Nordbank was granted to issue up to 30 billion euros guaranteed notes under the German SoFFin program. One requirement that

856-447: A further collapse, encourage lending, restore faith in the integral commercial paper markets, avoid the risk of a deflationary spiral , and provide banks with enough funds to allow customers to make withdrawals. In effect, the central banks went from being the " lender of last resort " to the "lender of only resort" for a significant portion of the economy. In some cases the Fed was considered

963-488: A global economic shock, resulting in several bank failures . Economies worldwide slowed during this period since credit tightened and international trade declined. Housing markets suffered and unemployment soared, resulting in evictions and foreclosures . Several businesses failed. From its peak in the second quarter of 2007 at $ 61.4 trillion, household wealth in the United States fell $ 11 trillion, to $ 50.4 trillion by

1070-479: A housing bubble to replace the Nasdaq bubble". Moreover, empirical studies using data from advanced countries show that excessive credit growth contributed greatly to the severity of the crisis. Additional downward pressure on interest rates was created by rising U.S. current account deficit, which peaked along with the housing bubble in 2006. Federal Reserve chairman Ben Bernanke explained how trade deficits required

1177-473: A new trial scheduled before the Hamburg District Court. In June 2019, five of the ex-directors settled the charges against them via the "payment of money". The ex-directors had to make individual payments of between 500 thousand and 1.6 million euros to settle the charges. In 2009, HSH Nordbank had a balance sheet of 174.5 billion euros and reported a loss of 678 million euros. In 2010, HSH Nordbank

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1284-547: A questionable CDO deal codenamed "Omega 55" between HSH Nordbank and BNP Paribas in late 2007, that eventually cost HSH Nordbank 500 million euros. Parts of that deal were not disclosed to the German Federal Financial Supervisory Authority (BaFin). Omega 55 was a hybrid CDO which exposed HSH Nordbank to the risks of default of other financial institutions including the now bankrupt Lehman Brothers and Washington Mutual . However, also included in

1391-809: A range of measures intended to preserve existing jobs and create new ones. Combined, the initiatives, coupled with actions taken in other countries, ended the worst of the Great Recession by mid-2009. Assessments of the crisis's impact in the U.S. vary, but suggest that some 8.7 million jobs were lost, causing unemployment to rise from 5 percent in 2007 to a high of 10 percent in October 2009. The percentage of citizens living in poverty rose from 12.5 percent in 2007 to 15.1 percent in 2010. The Dow Jones Industrial Average fell by 53 percent between October 2007 and March 2009, and some estimates suggest that one in four households lost 75 percent or more of their net worth . In 2010,

1498-545: A really bad economy. In other words, the borrowers did not cause the loans to go bad-it was the economy. Between 1998 and 2006, the price of the typical American house increased by 124%. During the 1980s and 1990s, the national median home price ranged from 2.9 to 3.1 times median household income. By contrast, this ratio increased to 4.0 in 2004, and 4.6 in 2006. This housing bubble resulted in many homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgages secured by

1605-412: A reported settlement of 7 million US dollars after the bank's supervisory board hired law firm WilmerHale to conduct an investigation. The management board of the bank also issued an apology to the former branch head in 2011. The European Commission , HSH Nordbank and its owners negotiated for years over a plan to restore the bank to health and avoid future state aid. In September 2011, all sides reached

1712-554: A resulting housing bubble , excessive risk-taking by global financial institutions , and lack of regulatory oversight, which culminated in a " perfect storm " that triggered the Great Recession , which lasted from late 2007 to mid-2009. The financial crisis began in early 2007, as mortgage-backed securities (MBS) tied to U.S. real estate , as well as a vast web of derivatives linked to those MBS, collapsed in value . Financial institutions worldwide suffered severe damage, reaching

1819-467: A settlement with the European Commission , ending state aid proceedings in return for tough limits on the size of the bank’s balance sheet and a one-off financial penalty of 500 million euros. Under the settlement, the bank was to pull out of asset-backed aviation finance and to limit property finance to its home market by 2014. It also included plans to reduce its staff from 3,300 to 2,100. For 2013,

1926-404: A significant increase in subprime lending . Subprime had not become less risky; Wall Street just accepted this higher risk. Due to competition between mortgage lenders for revenue and market share, and when the supply of creditworthy borrowers was limited, mortgage lenders relaxed underwriting standards and originated riskier mortgages to less creditworthy borrowers. In the view of some analysts,

2033-489: A single pool from which specific securities draw in a specific sequence of priority. Those securities first in line received investment-grade ratings from rating agencies. Securities with lower priority had lower credit ratings but theoretically a higher rate of return on the amount invested. By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid

2140-697: Is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability. In the table, the names of emerging and developing economies are shown in boldface type, while the names of developed economies are in Roman (regular) type. The twenty largest economies contributing to global GDP (PPP) growth (2007–2017) The expansion of central bank lending in response to

2247-427: Is the first in a wider investigation aimed at recovering billions from banks who profited from a scheme, described by finance minister Olaf Scholz, as a ‘scandal’ which Germany estimates cost it more than 5 billion euros." On 14 October 2019, Handlesblatt Online reported for the first time that Hamburg Commercial Bank's current CEO, Stephan Ermisch,may have personal exposure for restitution that may need to be paid back to

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2354-444: The 2007–2008 financial crisis , when it had sought to expand beyond its roots as a regional lender to companies and savings banks into global capital markets. It had done so in anticipation of the expiry of a rule that allowed for generous refinancing of German state-backed banks. With the beginning of the crisis, HSH had to report losses on their credit investment portfolio. In September 2008 HSH Nordbank announced further writedowns. As

2461-575: The Dodd–Frank Wall Street Reform and Consumer Protection Act was passed, overhauling financial regulations. It was opposed by many Republicans , and it was weakened by the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. The Basel III capital and liquidity standards were also adopted by countries around the world. The recession was a significant factor in the 2010s European debt crisis . The crisis sparked

2568-643: The Federal Reserve ("Fed") lowered the federal funds rate from 2000 to 2003, institutions increasingly targeted low-income homebuyers, largely belonging to racial minorities , with high-risk loans; this development went unattended by regulators. As interest rates rose from 2004 to 2006, the cost of mortgages rose and the demand for housing fell, causing property values to decline. In early 2007, as more U.S. mortgage holders began defaulting on their repayments, subprime lenders went bankrupt, culminating in April with

2675-469: The Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%. This was done to soften the effects of the collapse of the dot-com bubble and the September 11 attacks , as well as to combat a perceived risk of deflation . As early as 2002, it was apparent that credit was fueling housing instead of business investment as some economists went so far as to advocate that the Fed "needs to create

2782-659: The Great Depression . This matters for credit decisions. A homeowner with equity in her home is very unlikely to default on a car loan or credit card debt. They will draw on this equity rather than lose their car and/or have a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the case of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007 ... While many banks are obviously at

2889-667: The Great Recession , which, at the time, was the most severe global recession since the Great Depression. It was also followed by the European debt crisis, which began with a deficit in Greece in late 2009, and the 2008–2011 Icelandic financial crisis , which involved the bank failure of all three of the major banks in Iceland and, relative to the size of its economy, was the largest economic collapse suffered by any country in history. It

2996-463: The U.S. mortgage market . By 2012, the court found that HSH should have been able to conduct its own due diligence and dismissed the fraud claim, a decision that lawyers interpreted as having broader implications for investors seeking damages for losses incurred during the 2007–2008 financial crisis . On April 9, 2009, president of supervisory board Wolfgang Peiner appointed Freshfields Bruckhaus Deringer to investigate recent management decisions of

3103-545: The United States House Committee on Financial Services held a hearing, at the urging of the administration, to assess safety and soundness issues and to review a recent report by the Office of Federal Housing Enterprise Oversight (OFHEO) that had uncovered accounting discrepancies within the two entities. The hearings never resulted in new legislation or formal investigation of Fannie Mae and Freddie Mac, as many of

3210-450: The Vorstand . On April 17, 2009, the supervisory board of HSH Nordbank relieved Frank Roth, member of the management board of his duties and started pressing criminal charges against him. The bank claims that Roth leaked strictly confidential information to outside parties. In May 2009 Standard & Poor’s downgraded HSH to BBB+. On October 13, 2009, Norddeutscher Rundfunk reported on

3317-498: The mortgage-backed security and the collateralized debt obligation that were assigned safe ratings by the credit rating agencies . In effect, Wall Street connected this pool of money to the mortgage market in the US, with enormous fees accruing to those throughout the mortgage supply chain , from the mortgage broker selling the loans to small banks that funded the brokers and the large investment banks behind them. By approximately 2003,

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3424-403: The "buyer of last resort". During the fourth quarter of 2008, these central banks purchased US$ 2.5 (~$ 3.47 trillion in 2023) trillion of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action in world history. Following a model initiated by the 2008 United Kingdom bank rescue package ,

3531-722: The 2008 financial crisis, consumer regulators in America have more closely supervised sellers of credit cards and home mortgages in order to deter anticompetitive practices that led to the crisis. At least two major reports on the causes of the crisis were produced by the U.S. Congress: the Financial Crisis Inquiry Commission report, released January 2011, and a report by the United States Senate Homeland Security Permanent Subcommittee on Investigations entitled Wall Street and

3638-535: The 2018 sales process. Earlier, in relation to that same lawsuit, the investor group had filed a 1782 discovery request in the United States Court system asking to be allowed to serve subpoenas on the bank's new owners; Cerberus, JC Flowers and Goldentree Asset Management. The 1782 request seeks information related to the NPL portfolio sale and share sale. In their initial motion, plaintiffs stated "The inside nature of

3745-519: The CRA. They contend that there were two, connected causes to the crisis: the relaxation of underwriting standards in 1995 and the ultra-low interest rates initiated by the Federal Reserve after the terrorist attack on September 11, 2001. Both causes had to be in place before the crisis could take place. Critics also point out that publicly announced CRA loan commitments were massive, totaling $ 4.5 trillion in

3852-526: The Cologne Prosecutors Office now has over 400 individuals in its investigative sights, including two former HSH Nordbank managers. The investigation also has many financial institutions as targets, including HCOB. Spokespeople for HCOB say that they consider the matter resolved via their previous payments of 127mm euro. However, it is unclear whether the Cologne Prosecutors Office will again be investigating HCOB in relation to its participation in

3959-567: The Cum-Ex scandal returned in force for the German Banking industry as an ex-British banker, who had been charged with fraud in relation to the schemes, agreed to testify and explain the inner working and participants in these transactions in the Bonn District Court. On his first day of testimony the banker only referred to as Martin S. went into detail on how the transactions worked to defraud

4066-480: The Financial Crisis: Anatomy of a Financial Collapse , released April 2011. In total, 47 bankers served jail time as a result of the crisis, over half of which were from Iceland , where the crisis was the most severe and led to the collapse of all three major Icelandic banks. In April 2012, Geir Haarde of Iceland became the only politician to be convicted as a result of the crisis. Only one banker in

4173-497: The German Government in relation to cum-ex trading. His exposure owes to the fact that Ermisch had oversight of the departments at Hypo-Vereinsbank (his previous employer) which engaged in cum-ex trading and the bank is now seeking compensation from three ex-committee members in an amount of 110mm euros. There is a chance that these ex-committee members, in turn, will make a claim against Ermisch. The article also claims that at

4280-499: The German Treasury by making it appear that one set of stock securities had more than one owner. These multiple owners would all then file for tax refund reimbursements related to the dividends received from the underlying stock. Martin then went on to name the biggest players in the scandal of who he was aware. He named Hypo-Vereinsbank, Commerzbank, HSH Nordbank, WestLB and Deutsche Bank as those players. The trial of Martin S. "

4387-483: The LMI borrowers targeted by the CRA, especially in the years 2005–2006 leading up to the crisis, nor did it find any evidence that lending under the CRA rules increased delinquency rates or that the CRA indirectly influenced independent mortgage lenders to ramp up sub-prime lending. To other analysts the delay between CRA rule changes in 1995 and the explosion of subprime lending is not surprising, and does not exonerate

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4494-587: The NPL Portfolio Sale, and the decision to sell HSH and the NPL Portfolio (at a deep discount to book value) to virtually the same investor consortium, strongly suggest severe irregularities in both the Bank Sale and the NPL Portfolio Sale transactions." The Court granted the request at the end of 2018. The decision is currently under appeal. On October 4, 2019, the court lifted the stay that had been placed over

4601-589: The SEC's December 2011 securities fraud case against six former executives of Fannie and Freddie, Peter Wallison and Edward Pinto estimated that, in 2008, Fannie and Freddie held 13 million substandard loans totaling over $ 2 trillion. In the early and mid-2000s, the Bush administration called numerous times for investigations into the safety and soundness of the GSEs and their swelling portfolio of subprime mortgages. On September 10, 2003,

4708-545: The U.S. to borrow money from abroad, in the process bidding up bond prices and lowering interest rates. Bernanke explained that between 1996 and 2004, the U.S. current account deficit increased by $ 650 billion, from 1.5% to 5.8% of GDP. Financing these deficits required the country to borrow large sums from abroad, much of it from countries running trade surpluses. These were mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that

4815-409: The United States did not have wealth declines at all during the crisis because they generally did not own financial investments whose value can fluctuate. The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63% of all Americans declined in that period and 77% of the richest families had a decrease in total wealth, while only 50% of those on the bottom of

4922-480: The United States served jail time as a result of the crisis, Kareem Serageldin , a banker at Credit Suisse who was sentenced to 30 months in jail and returned $ 24.6 million in compensation for manipulating bond prices to hide $ 1 billion of losses. No individuals in the United Kingdom were convicted as a result of the crisis. Goldman Sachs paid $ 550 million to settle fraud charges after allegedly anticipating

5029-554: The bailout to Fannie Mae and Freddie Mac exceeds $ 300 billion (c. $ 401 billion in 2023 ) (calculated by adding the fair value deficits of the entities to the direct bailout funds at the time). Economist Paul Krugman argued in January 2010 that the simultaneous growth of the residential and commercial real estate pricing bubbles and the global nature of the crisis undermines the case made by those who argue that Fannie Mae, Freddie Mac, CRA, or predatory lending were primary causes of

5136-527: The bailouts, such as in the case of the AIG bonus payments controversy , leading to the development of a variety of "decision making frameworks", to help balance competing policy interests during times of financial crisis. Alistair Darling , the U.K.'s Chancellor of the Exchequer at the time of the crisis, stated in 2018 that Britain came within hours of "a breakdown of law and order" the day that Royal Bank of Scotland

5243-656: The bank is not anymore governed by public law. In 2003, the bank had a balance sheet total of 172 billion euros and employed 4,500 people. In 2006, HSH Nordbank pledged to seek an unprecedented stock market listing, edging out its chief executive Alexander Stuhlmann to prepare the way. Shortly after, WestLB agreed to sell its 26.6 per cent stake in HSH Nordbank to a consortium of five institutional investors, led by J.C. Flowers & Co. , for 1.25 billion euros. Flowers had competed with three investors – Cerberus Capital Management , Hellman & Friedman , and Corsair Capital – for

5350-689: The bank presented its worst set of results since 2008, with an annual net loss close to 800 million euros. In 2015, Minister-President Torsten Albig of Schleswig-Holstein and First Mayor of Hamburg Olaf Scholz negotiated a restructuring deal with the European Commission that allowed HSH Nordbank to offload 6.2 billion euros in troubled assets – mainly non-performing ship loans – onto its government majority owners and avoid being shut down, saving around 2,500 jobs. The agreement stipulated that if no private-sector buyer emerged by 2018, HSH Nordbank had to be wound down. The European Commission approved

5457-552: The bankruptcy of New Century Financial . As demand and prices continued to fall, the contagion spread to worldwide credit markets by August, and central banks began injecting liquidity . By July 2008, Fannie Mae and Freddie Mac , companies which together owned or guaranteed half of the U.S. housing market, were on the verge of collapse; the Housing and Economic Recovery Act enabled the government to take over and cover their combined $ 1.6 trillion debt on September 7. In response to

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5564-445: The bank’s non-performing loan portfolio, principally shipping-related, sold to a special purpose vehicle set up by Cerberus, JC Flowers, GoldenTree and Centaurus at a price below its current book value. The sale of shares is subject to the approval of the European Commission and the European Central Bank . After its privatization, HSH Nordbank will also have to leave the deposit insurance scheme of Germany’s publicly owned banks and join

5671-726: The brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. The problem with the economy is the loss of close to $ 6 trillion in housing wealth and an even larger amount of stock wealth. ... the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity

5778-690: The bubble burst, Australian economist John Quiggin wrote, "And, unlike the Great Depression, this crisis was entirely the product of financial markets. There was nothing like the postwar turmoil of the 1920s, the struggles over gold convertibility and reparations, or the Smoot-Hawley tariff , all of which have shared the blame for the Great Depression." Instead, Quiggin lays the blame for the 2008 near-meltdown on financial markets, on political decisions to lightly regulate them, and on rating agencies which had self-interested incentives to give good ratings. Lower interest rates encouraged borrowing. From 2000 to 2003,

5885-481: The capital infusion. Together with this increase of its core-capital, HSH announced further restructuring. It planned to spin off non-strategic activities and the toxic asset portfolio into a—yet to be created— bad bank . In 2008, HSH Nordbank filed a claim with the New York Supreme Court against UBS over losses it says it suffered on a $ 500 million portfolio of collateralized debt obligations linked to

5992-496: The committee members refused to accept the report and instead rebuked OFHEO for their attempt at regulation. Some, such as Wallison, believe this was an early warning to the systemic risk that the growing market in subprime mortgages posed to the U.S. financial system that went unheeded. A 2000 United States Department of the Treasury study of lending trends for 305 cities from 1993 to 1998 showed that $ 467 billion of mortgage lending

6099-399: The company to offer specialist courses. 2007%E2%80%932008 financial crisis The 2007–2008 financial crisis , or the global financial crisis ( GFC ), was the most severe worldwide economic crisis since the 1929 Wall Street crash that began the Great Depression . Causes of the crisis included predatory lending in the form of subprime mortgages to low-income homebuyers and

6206-403: The crisis and selling toxic investments to its clients. With fewer resources to risk in creative destruction, the number of patent applications was flat, compared to exponential increases in patent application in prior years. Typical American families did not fare well, nor did the "wealthy-but-not-wealthiest" families just beneath the pyramid's top. However, half of the poorest families in

6313-446: The crisis in commercial real estate and related lending took place after the crisis in residential real estate. Business journalist Kimberly Amadeo reported: "The first signs of decline in residential real estate occurred in 2006. Three years later, commercial real estate started feeling the effects." Denice A. Gierach, a real estate attorney and CPA, wrote: ... most of the commercial real estate loans were good loans destroyed by

6420-437: The crisis was not only confined to the Federal Reserve 's provision of aid to individual financial institutions. The Federal Reserve has also conducted a number of innovative lending programs with the goal of improving liquidity and strengthening different financial institutions and markets, such as Freddie Mac and Fannie Mae . In this case, the major problem among the market is the lack of free cash reserves and flows to secure

6527-450: The crisis. As part of national fiscal policy response to the Great Recession , governments and central banks, including the Federal Reserve , the European Central Bank and the Bank of England , provided then-unprecedented trillions of dollars in bailouts and stimulus , including expansive fiscal policy and monetary policy to offset the decline in consumption and lending capacity, avoid

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6634-509: The crisis. In other words, bubbles in both markets developed even though only the residential market was affected by these potential causes. Countering Krugman, Wallison wrote: "It is not true that every bubble—even a large bubble—has the potential to cause a financial crisis when it deflates." Wallison notes that other developed countries had "large bubbles during the 1997–2007 period" but "the losses associated with mortgage delinquencies and defaults when these bubbles deflated were far lower than

6741-405: The deal were several billion euros of risk tied to HSH Nordbank's own assets. It is alleged that he inclusion of this last element allowed HSH Nordbank to move several billions of risky assets off its balance sheet at year end and avoid costly capital reserves which BaFin would require the bank to post. The assets were repurchased several weeks later after auditors had closed the books of the bank for

6848-414: The end of the first quarter of 2009, resulting in a decline in consumption, then a decline in business investment. In the fourth quarter of 2008, the quarter-over-quarter decline in real GDP in the U.S. was 8.4%. The U.S. unemployment rate peaked at 11.0% in October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since

6955-600: The end product." Essentially, investment banks and hedge funds used financial innovation to enable large wagers to be made, far beyond the actual value of the underlying mortgage loans, using derivatives called credit default swaps, collateralized debt obligations and synthetic CDOs . By March 2011, the FDIC had paid out $ 9 billion (c. $ 12 billion in 2023 ) to cover losses on bad loans at 165 failed financial institutions. The Congressional Budget Office estimated, in June 2011, that

7062-473: The federal funds rate to drop below where it was supposed to be. However, in October 2008, the Federal Reserve was granted the power to provide banks with interest payments on their surplus reserves. This created a motivation for banks to retain their reserves instead of disbursing them, so reducing the need for the Federal Reserve to hedge its increased lending by decreases in alternative assets. Money market funds also went through runs when people lost faith in

7169-426: The financial system and got banks to start lending again, both to each other and to people. Many homeowners who were trying to keep their homes from going into default got housing credits. A package of policies was passed that let borrowers refinance their loans even though the value of their homes was less than what they still owed on their mortgages . While the causes of the bubble and subsequent crash are disputed,

7276-602: The findings of an investigatory report by the law firm Clifford Chance. HSH's involvement in cum-ex dividend trades were to follow the bank throughout the years up to 2017 In mid-2016, the bank’s owners hired Citigroup to organize the process to privatize HSH Nordbank under European state-aid rules by the end of February 2018. Over the course of 2017, Apollo Global Management of the United States as well as Anbang Insurance Group , HNA Group and ICBC of China were considered as interested buyers but ultimately did not submit

7383-457: The government began collecting the data in 1964. The economic crisis started in the U.S. but spread to the rest of the world. U.S. consumption accounted for more than a third of the growth in global consumption between 2000 and 2007 and the rest of the world depended on the U.S. consumer as a source of demand. Toxic securities were owned by corporate and institutional investors globally. Derivatives such as credit default swaps also increased

7490-595: The government seized Washington Mutual (the largest savings and loan firm ). On October 3, Congress passed the $ 800 billion Emergency Economic Stabilization Act , which authorized the Treasury Department to purchase troubled assets and bank stocks. The Fed began a program of quantitative easing by buying treasury bonds and other assets, such as MBS, and the February 2009 American Recovery and Reinvestment Act , signed by newly elected President Barack Obama , included

7597-506: The governments of European nations and the United States guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $ 1.5 trillion newly issued preferred stock in major banks. The Federal Reserve created then-significant amounts of new currency as a method to combat the liquidity trap . Bailouts came in the form of trillions of dollars of loans, asset purchases, guarantees, and direct spending. Significant controversy accompanied

7704-501: The growing crisis, governments around the world deployed massive bail-outs of financial institutions and other monetary and fiscal policies to prevent a collapse of the global financial system . After the bankruptcy of Lehman Brothers , the fourth largest U.S. investment bank, on September 15, the next day the Fed bailed out the American International Group (the largest U.S. insurance company), and on September 25

7811-421: The higher payments associated with rising interest rates and began to default. During 2007, lenders began foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006. This increased to 2.3 million in 2008, an 81% increase vs. 2007. By August 2008, approximately 9% of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4%. After

7918-578: The linkage between large financial institutions. The de-leveraging of financial institutions, as assets were sold to pay back obligations that could not be refinanced in frozen credit markets, further accelerated the solvency crisis and caused a decrease in international trade. Reductions in the growth rates of developing countries were due to falls in trade, commodity prices, investment and remittances sent from migrant workers (example: Armenia ). States with fragile political systems feared that investors from Western states would withdraw their money because of

8025-489: The loans. The Federal Reserve took a number of steps to deal with worries about liquidity in the financial markets. One of these steps was a credit line for major traders, who act as the Fed's partners in open market activities. Also, loan programs were set up to make the money market mutual funds and commercial paper market more flexible. Also, the Term Asset-Backed Securities Loan Facility (TALF)

8132-428: The losses suffered in the United States when the 1997–2007 [bubble] deflated." According to Wallison, the reason the U.S. residential housing bubble (as opposed to other types of bubbles) led to financial crisis was that it was supported by a huge number of substandard loans—generally with low or no downpayments. Krugman's contention (that the growth of a commercial real estate bubble indicates that U.S. housing policy

8239-434: The magazine were covered with £6,000 from Associated Newspapers and £200 from Sergeant himself and a number of other Mail employees, with Hambros Bank putting up stand-by credit. Padraic Fallon joined the magazine as editor. He would takeover as chairman and executive after Sergeant, overseeing the company until his death in 2012. Patrick Sergeant continued to manage the business until 1985 when he became chairman. The company

8346-626: The majority report of the Financial Crisis Inquiry Commission, conservative American Enterprise Institute fellow Peter J. Wallison stated his belief that the roots of the financial crisis can be traced directly and primarily to affordable housing policies initiated by the United States Department of Housing and Urban Development (HUD) in the 1990s and to massive risky loan purchases by government-sponsored entities Fannie Mae and Freddie Mac. Based upon information in

8453-590: The market. To keep it from getting worse, the Fed said it would give money to mutual fund companies. Also, Department of Treasury said that it would briefly cover the assets of the fund. Both of these things helped get the fund market back to normal, which helped the commercial paper market, which most businesses use to run. The FDIC also did a number of things, like raise the insurance cap from $ 100,000 to $ 250,000, to boost customer trust. They engaged in Quantitative Easing , which added more than $ 4 trillion to

8560-566: The most recent deals. The magazine has interviewed numerous politicians and economists, including Arthur Laffer , Pierre Moscovici and Margrethe Vestager . The International Financial Law Review is the "market-leading financial law publication for lawyers in financial institutions, corporates and private practice". The company also provides training services: the London Metal Exchange announced in January 2015 that it would partner with

8667-518: The precipitating factor for the Financial Crisis of 2007–2008 was the bursting of the United States housing bubble and the subsequent subprime mortgage crisis , which occurred due to a high default rate and resulting foreclosures of mortgage loans , particularly adjustable-rate mortgages . Some or all of the following factors contributed to the crisis: The relaxing of credit lending standards by investment banks and commercial banks allowed for

8774-501: The price appreciation. In a Peabody Award -winning program, NPR correspondents argued that a "Giant Pool of Money" (represented by $ 70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade. This pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with products such as

8881-427: The private sector plan. Hamburg and Schleswig-Holstein later said that total losses they incurred in their HSH investment would range from 10.8 billion to a maximum of 14 billion euros. In January 2019 a group of 18 bond investors sued HSH Nordbank for 1.4 billion euros, accusing the bank of improperly lowering the book value of its Tier One capital instruments via accounting actions the bank took prior to and during

8988-495: The production of documents in the 1782 case. The plaintiffs are free to begin discovery even while the 1782 case is under appeal This lawsuit is in addition to earlier lawsuits filed by the insurance companies Talanx, Huk-Coburg and Baloise in May 2018 over the same issues. Those lawsuits seeks damages of over euro 285 million. In December 2019, HCOB settled with the group of bondholders that had sued it in January 2019. In September 2019,

9095-451: The promotion of thousands of small mortgage brokers, and by their close relationship to subprime loan aggregators such as Countrywide . Depending on how "subprime" mortgages are defined, they remained below 10% of all mortgage originations until 2004, when they rose to nearly 20% and remained there through the 2005–2006 peak of the United States housing bubble . The majority report of the Financial Crisis Inquiry Commission , written by

9202-400: The pyramid suffered a decrease. The following is a timeline of the major events of the financial crisis, including government responses, and the subsequent economic recovery. There is a really good reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years ago have little or nothing today. Businesses are facing the worst downturn since

9309-416: The relatively conservative government-sponsored enterprises (GSEs) policed mortgage originators and maintained relatively high underwriting standards prior to 2003. However, as market power shifted from securitizers to originators, and as intense competition from private securitizers undermined GSE power, mortgage standards declined and risky loans proliferated. The riskiest loans were originated in 2004–2007,

9416-465: The report, the new Executive Board members Brody and Banwell will each receive between four and five million euros a year, including bonuses. After the sale of HSH Nordbank in 2018 the shareholders in the institution are: Euromoney Institutional Investor Delinian (formerly Euromoney Institutional Investor ) is a British financial media company that has interests in business and financial publishing and event organisation. As of 2020 , it

9523-541: The scandal and whether more charges and penalties might be forthcoming. The articles now estimate the scandal cost the German Treasury approximately 12 billion euros. The members of the Board of Managing Directors of Hamburg Commercial Bank are: As reported by Hamburger Abendblatt in April 2020, the remuneration of the Executive Board was more than quintupled from €3.5 million for 2018 to €18.9 million for 2019. According to

9630-610: The six Democratic appointees, the minority report, written by three of the four Republican appointees, studies by Federal Reserve economists, and the work of several independent scholars generally contend that government affordable housing policy was not the primary cause of the financial crisis. Although they concede that governmental policies had some role in causing the crisis, they contend that GSE loans performed better than loans securitized by private investment banks, and performed better than some loans originated by institutions that held loans in their own portfolios. In his dissent to

9737-522: The stake. The investment marked the first part-privatisation of a Landesbank and its experience was being closely watched as an indicator of how difficult it would be for others to prise open the state-controlled sector. By 2008, J.C. Flowers injected about 300 million euros of fresh equity, in spite of the bank’s failure to have an initial public offering that year. Similarly to peers such as NORD/LB , Commerzbank , Deutsche Hypothekenbank and KfW , HSH Nordbank buckled under excessive risk-taking prior to

9844-464: The supply of mortgages originated at traditional lending standards had been exhausted, and continued strong demand began to drive down lending standards. The collateralized debt obligation in particular enabled financial institutions to obtain investor funds to finance subprime and other lending, extending or increasing the housing bubble and generating large fees. This essentially places cash payments from multiple mortgages or other debt obligations into

9951-519: The time HSH's own misdeeds in relation to cum-ex trading came to light, the Hanseatic state government showed no zeal to actually investigate the bank at that time. However, currently the Cum-ex scandal is being actively pursued by prosecutors in the city of Cologne who are showing much more zeal in pursuing banks that engaged in the illegal stock maneuvers. It was further reported by many German newspapers that

10058-603: The year. In 2012 the Hamburg Public Prosecutors filed charges against six former HSH Nordbank Directors, including the former CEO Dirk Jens Nonnenmacher, in relation to the Omega 55 transaction. The indictment ran to over 600 pages long. They were accused of breach of trust and accounting fraud. The charges were dismissed in 2014. However, that acquittal was overturned by the Federal Court of Justice in October 2016 and

10165-617: The years between 1994 and 2007. They also argue that the Federal Reserve's classification of CRA loans as "prime" is based on the faulty and self-serving assumption that high-interest-rate loans (3 percentage points over average) equal "subprime" loans. Others have pointed out that there were not enough of these loans made to cause a crisis of this magnitude. In an article in Portfolio magazine, Michael Lewis spoke with one trader who noted that "There weren't enough Americans with [bad] credit taking out [bad loans] to satisfy investors' appetite for

10272-464: The years of the most intense competition between securitizers and the lowest market share for the GSEs. The GSEs eventually relaxed their standards to try to catch up with the private banks. A contrarian view is that Fannie Mae and Freddie Mac led the way to relaxed underwriting standards, starting in 1995, by advocating the use of easy-to-qualify automated underwriting and appraisal systems, by designing no-down-payment products issued by lenders, by

10379-481: Was again caught up in scandal. Its CEO, Jens Nonnenmacher, and its General Counsel, Wolfgang Gossman, were accused of planting child pornography on the office computer of the then Head of its New York Branch. The child pornography was planted in order to give the bank an excuse to fire the branch head. United States prosecutors originally moved against the branch head but rescinded the allegations when certain evidence did not hold up. The bank settled this scandal through

10486-524: Was among the five worst financial crises the world had experienced and led to a loss of more than $ 2 trillion from the global economy. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $ 10.5 (~$ 14.6 trillion in 2023) trillion. The increase in cash out refinancings , as home values rose, fueled an increase in consumption that could no longer be sustained when home prices declined. Many financial institutions owned investments whose value

10593-667: Was approved by the court on 22 November 2022. The company changed its name to Delinian in January 2023. Acquisitions include: Euromoney's portfolio includes brands such as Euromoney, Institutional Investor , BCA Research , Ned Davis Research , Fastmarkets MB , Fastmarkets AMM , International Tax Review , International Financial Law Review (IFLR), Managing Intellectual Property (MIP), SRP, Random Lengths, EMIS, Insurance Insider, Fastmarkets RISI, Global Capital and IJGlobal. International Tax Review (ITR) provides comprehensive coverage of international tax news and policy analysis, as well as surveys, in-depth features and unique guides to

10700-450: Was bailed-out. Instead of financing more domestic loans, some banks instead spent some of the stimulus money in more profitable areas such as investing in emerging markets and foreign currencies. In July 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in the United States to "promote the financial stability of the United States". The Basel III capital and liquidity standards were adopted worldwide. Since

10807-542: Was based on home mortgages such as mortgage-backed securities , or credit derivatives used to insure them against failure, which declined in value significantly. The International Monetary Fund estimated that large U.S. and European banks lost more than $ 1 trillion on toxic assets and from bad loans from January 2007 to September 2009. Lack of investor confidence in bank solvency and declines in credit availability led to plummeting stock and commodity prices in late 2008 and early 2009. The crisis rapidly spread into

10914-633: Was first listed on the London Stock Exchange in 1986. Sergeant retired as chairman in September 1992 when he was appointed president and non-executive director, but served as a board member until May 2018. It was formerly 49% owned by the Daily Mail and General Trust Group until the stake was spun-off in 2019. In July 2022, the company agreed to accept a takeover offer worth £1.7 billion from private equity groups, Astorg and Epiris. The transaction

11021-504: Was imposed on HSH was to raise the capital ratio to at least 8%. On January 20, 2009, 3 billion euros 3 year guaranteed notes were issued. On February 24, 2009, HSH received new capital of EUR 3 billion and credit guarantees of 10 billion euros by the two main shareholders, the states of Hamburg and Schleswig-Holstein. The other shareholders, JC Flowers and the Savings Banks Association of Schleswig-Holstein, did not participate in

11128-550: Was made by Community Reinvestment Act (CRA)-covered lenders into low and mid-level income (LMI) borrowers and neighborhoods, representing 10% of all U.S. mortgage lending during the period. The majority of these were prime loans. Sub-prime loans made by CRA-covered institutions constituted a 3% market share of LMI loans in 1998, but in the run-up to the crisis, fully 25% of all subprime lending occurred at CRA-covered institutions and another 25% of subprime loans had some connection with CRA. However, most sub-prime loans were not made to

11235-508: Was not the cause of the crisis) is challenged by additional analysis. After researching the default of commercial loans during the financial crisis, Xudong An and Anthony B. Sanders reported (in December 2010): "We find limited evidence that substantial deterioration in CMBS [commercial mortgage-backed securities] loan underwriting occurred prior to the crisis." Other analysts support the contention that

11342-491: Was one of Europe's largest business and financial information companies. It was listed on the London Stock Exchange and was a constituent of the FTSE 250 Index until it was acquired by private equity groups, Astorg and Epiris, in November 2022. Euromoney magazine was founded by Sir Patrick Sergeant in 1969 as an international business-to-business media group focused primarily on the international finance sector. The costs to launch

11449-515: Was put in place thanks to a joint effort with the US Department of the Treasury. This plan was meant to make it easier for consumers and businesses to get credit by giving Americans who owned high-quality asset-backed securities more credit. Before the crisis, the Federal Reserve's stocks of Treasury securities were sold to pay for the increase in credit. This method was meant to keep banks from trying to give out their extra savings, which could cause

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