BMGT 445 Study Guide - Comprehensive Final Exam Guide - Mortgage Loan, Basel Iii, Basel I

• School: University of Maryland
• Department: Business and Management
• Course: BMGT 445
• Professor: Elinda Kiss

Document Summary

As discussed in the your bank has failed video, many banks like heritage bank, failed due to their overzealous bets on real estate, just before the housing crisis. While that was back around 2008, many banks today close for similar reasons. Banks will borrow too much, all the while depending on another sector to do well. In the instance of the housing bubble, banks relied on the ability to resell houses whose owners defaulted on payments. However, because so many people began to default on mortgages, the price of houses dropped and people walked away. The fdic looks at the assets of the bank that they can sell along with the liabilities and any loans the bank has given. They then allow for bids by banks that have good ratings and regulatory approval along with independent investor groups. The ideal resolution is one where all deposits are assumed and as many assets are sold to the acquiring party.