Business Conversation Questions are widely used in speaking activities as pair interview or group discussion.
The Credit Crunch
The credit crunch of 2007-9 was part of a wider banking crisis. US banks had lent too much money to mortgage borrowers who could not repay. These were called sub-prime or, informally, NINJA – no income, no job or assets – mortgages. The banks had repackaged and sold on these mortgages in the form of new securities – lending – to other financial institutions, who then lent money to yet others on the basis that they would get their money back from repayments of the original mortgages.
However, the buyers of these securities did not know that the mortgages were high-risk. When house buyers started to default on – stop repaying- their loans, the lenders were in trouble. These defaults meant that what banks thought were valuable securities were in fact toxic – worthless – assets.
Some commentators blamed light-touch regulation of banks; they said that the government regulators had not been strict enough. And they criticized ratings agencies – commercial organizations that publish risk levels for different securities, who had underestimated the risks. Banks said that they wanted to deleverage – rely less on borrowed money. Some financial institutions were in danger of going out of business, and governments in some countries had to rescue them. Banks refused to lend to each other and to companies and individuals, causing problems in the real economy, with businesses and individuals unable to borrow money in the ways that they had been used to. This in turn led to a full-blown – total – economic crisis.
From Business Vocabulary in Use
Sample Conversation Questions:
Can you explain the Credit Crunch?
Why does the Credit Crunch happen?
Is it common in your country? Why?
Is it a modern phenomenon? Why?