How Goldman Sachs Survived the US Mortgage Crisis
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Code : ECC0041
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Region : US |
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The US Mortgage Crisis The root cause of the US subprime mortgage crisis can be traced back to the early days of the 21st century, when US housing market started recovering from a recession caused due to the Dot-Com bubble5 that burst in 2000. Following the dot-com bubble, NASDAQ Composite index6 dropped by 39%7 and the massive amount of funds locked up in these stocks were diverted to the real estate market. Impact of the Crisis Following the subprime mortgage crisis, nearly 22 mortgage lenders filed for bankruptcy in two months ended February 2007.21 Accredited Home Lenders, a struggling subprime mortgage lender, posted a $260.2 million loss at the end of March 31st 2007 compared to the year earlier profit of $35.8 million. New Century Financial, one of the leading mortgage lenders in the US filed for Chapter 11 bankruptcy protection in April 2007 with the total loss of $60 billion (£30.4 billion). Countrywide Financial, another biggest subprime lender in the US received $2 billion cash injection from the Bank of America to solve the crisis. |
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Goldman's survival strategy Goldman Sachs was a leading global investment bank in the US that provided a wide range of services worldwide for corporations, financial institutions, governments and wealthiest families. It had three core segments of operations – investment banking, trading and principal investments and asset management and securities services. Out of the three segments, it garnered most of its revenues from the trading and principal investments...
