Surviving the Credit Crunch: Tactics and Strategies for Risk, Data and Loss Mitigation

07:48 | Paul Lancour | Sep 30th, 2008 12:35pm |

Join BearingPoint Managing Director and Senior Vice President of Global Markets, Peter Horowitz, as he explores the recent credit crisis and its contributors. With all the turmoil in the financial services space over the past few weeks, it seems that one must look at the source of the problem to really understand how it originated. It started out with a large amount of credit, coupled with lax lending standards and many heavy borrowers which created a heavy base of players, such as the mortgage owners and banks. It then trickled down to those that weren’t even familiar with the borrower or the actual real estate itself. This ‘mortgage value chain’ was the beginning of the turbulence we are all becoming so familiar with.

So what actually caused the crisis, especially within investment banks? The problem was too much leverage. These banks did not have sufficient capital to support the size of their ownership positions. When the position turned against them, both realized and unrealized losses, it wiped out their capital. It really comes down to the fact that their risk management systems failed the senior management of these giant organizations. It was so complex that the firms could ...