China learned from the subprime mortgage crisis, the six experience

 First Financial Daily that the Chinese People's Bank of China Deputy Governor Yi Gang, recently held at the Hong Kong University of Science and Technology learned from the subprime crisis, what? point of the entire financial stability. macroeconomic policy and monetary policy, can be a very complex combination, but more emphasis on monetary policy, such as interest rates, exchange rates, money supply, financial markets, capital markets, these large macro-variables should be coordinated to be able to maintain economic and financial stability. observed over the past six or seven in the case of the United States and the world will find too much if the money supply, interest rates too low for a long time, possibly creating financial assets bubble of the soil. The second, there is no free lunch, contrary to laws of the market must pay a price. Add the sub-prime loan period is about 2002 to 2006 that for 5 years. sub-prime mortgage balance will total one trillion dollars, But its impact on the entire financial market is very large. can be understood as a subprime mortgage market innovation, this innovation can be assumed that housing prices continued to rise, and assume that people can continue to buy a house refinancing, interest rates and very low. If prices continue to rise, the game can continue. but a lot of substandard loans were borrowed at the same time there are not many people manage their debt. a change in interest rates, house prices have a change to the financial risk. The biggest problem is to allow people who do not meet the standard through these loans, in fact, inadequate standards of these people should never buy a house with a way of borrowing. We know that not all the consumer groups of people are suitable for loans, this points to a special attention. I say that Bing is not to say I have no sympathy poor, I am very sympathetic to the poor, but also very much hope that the poor can have a place to live, but resolving the housing problems of the poor can use low-cost housing and other financial means to resolve, we should use fiscal policy or other economic policies to solve. This gives us what lessons? is done in the fiscal finances should be made to the grant of the poor should be the government subsidies the poor thing, if in a way that does not meet the financial criteria people to get loans, like loans to solve the problem again sold out, actually caused the cost is very high. so it proved once again that the economics no free lunch, we have to comply with market rules. s three, due to information asymmetry, the market over that rating companies. Ye Hao investors to buy these assets, institutions Ye Hao, they do a certain amount of due diligence, but not all the assets of each loan package into it. Because the information asymmetry, excessive trust rating. rating of the company's model is based on historical data do, there are a lot of assumptions, such as the assumptions on the price, the assumption of GDP, inflation assumptions, the assumptions on interest rates and so on. these models there are no foreseeable risks in a timely manner, so there is relatively high rating. At this time, in fact, the regulatory authorities should be the policy from the macro point of view, it should be from a lack of coordination on macro variables to detect the risk, it seems that (regulators) not doing enough, not timely warning of the market, on this issue we should be able to learn what the common thought. fourth, after exposure, resulting in a huge uncertainty, many people do not have the subprime mortgage crisis is estimated that such a a big impact. This impact of the transmission mechanism is due to the uncertainty of damage to the commercial bank's capital adequacy ratio, damage to the central market of the world's capital adequacy ratio of commercial banks and investment banks operating conditions. We know that there had been Mexico's financial crisis, Long Term Capital Management (LTCM), the financial crisis, the Asian financial crisis, but whether it is Mexico, Russia, or LTCM, the Asian financial crisis, the fact that the financial crisis or partial, are not really damaging to the core market largest commercial bank, investment bank's capital adequacy ratio and balance sheet. But the subprime loan crisis in the heart of the financial markets around the world - the U.S., spread to Europe and other areas, and capital adequacy ratio and balance sheet are relatively large is precisely the effect is very active in the leadership of the world type of commercial banks and investment banks, this is not a local crisis, but a global crisis. This uncertainty came out, the hurt the capital adequacy ratio to not loans, resulting in a credit crunch. credit crunch, the tension generated liquidity, spread to a large extent the. such as the UK's Northern Rock bank, in fact, how much credit does not hold its own, it is the issue of financing instruments to set their eyes on the market business, due to a liquidity squeeze, unable to pronounce the bond market, the risk premium is too high, feel insecure, there is no way to bank financing. crisis spread to many by the money market and bond market financing for normal lending activities of financial institutions , is a full magnitude of the crisis. fifth, measures to stabilize the monetary authorities continue to prevent crises and moral hazard in both the trade-off is very difficult. Bank of England, European Central Bank, after the Fed's attitude in dealing with the crisis, position, and the timeliness of relief, rescue methods were inconsistent. all of these inconsistencies. in fact can be summarized in two aspects: on the one hand to prevent the spread of the crisis, such as 1929 to 1933 and produced the Great Depression, Great Depression, and there is no stock market crash of 1987 (leading to a depression, the Great Depression). but on the other hand, just as the Bank of England governor said, also to prevent moral hazard, to prevent irresponsible to rely on the Government's moral hazard. two those trade-offs, the monetary authorities to take measures to stabilize the most difficult. monetary authorities in a difficult stabilization measures, there is too much if the monetary authorities intervene, if the monetary authorities to accept to do a lot of collateral assets in question, in fact, affect the these assets in the market price discovery, making the extension of market adjustment, temporarily cover up the problem, price discovery and market clearing will be slow. how both to prevent the spread of the crisis, but also to prevent moral hazard, but also to ensure maximum efficiency market price discovery and market clearing function, which is the monetary authorities should consider. Article VI, to mention a thought. from 1933 to 1999, more than 60 years, the United States implement the After the Great Depression of 1933 put forward the basic idea is to separate operation, separate supervision. on the nature of the bill, it was said to be misread, some people say is correct summary of .1933 has been adopted in 60 years after the entry into force Until 1999 the U.S. Congress passed the subprime mortgage crisis occurred?