Chapter 131: The Fanned Subprime Mortgage Crisis

Hello everyone, I'm journalist Jenny Zhan, and I'm broadcasting the news from in front of the Federal Bankruptcy Court in Fenway.

Yesterday was probably the busiest day since the Federal Bankruptcy Court behind me was established, because it received more than 2,000 bankruptcy petitions in one day. What's the concept? We know that the court only has seven hours to accept cases, which means that almost every minute, someone came to the court and filed for bankruptcy.

So we can't help but ask, what made so many people go to the court at the same time to file for bankruptcy? The answer is their loans.

I'm holding in my hand the bankruptcy application statistics released by the court. According to the data, more than 99% of the bankruptcy applications yesterday were personal bankruptcies, and these bankrupt individuals were all from ethnic minorities with very low credit ratings or people who did not have formal jobs. Due to their low credit ratings, these people are unable to obtain regular preferential loans from banks. Whether they want to buy a car or a house, they can only turn to loan companies for subprime loans.

There is no doubt that the interest rates on these subprime loans are much higher than those on regular preferential loans from banks. In the end, these people with insufficient repayment ability are crushed by the high loan interest rates, so they have no choice but to file for bankruptcy.

If only one person or a few people went bankrupt, it might be attributed to an accident. But the collective bankruptcy of so many people makes us question the current credit system and the subprime mortgage market: why did this happen? Is there something hidden? And what impact will it have on society as a whole?

Okay, let's go back to the studio. Thanks to Jenny for her report from the courthouse.

It is true that 2,000 bankruptcy petitions a day are shocking, but as Fanny said, it doesn't seem like an isolated incident. Will it have an impact on society as a whole? To find out, we've got in touch with Professor of Financial Research at Harvard University, Dr. Delong. We're sure this expert will give us a relatively unbiased explanation.

Hello everyone, I'm Delongk. Personally, I think it's extremely serious to receive 2,000 bankruptcy applications in one day, and this is just Fenway. How many people will file for bankruptcy in South Brighton or elsewhere? I haven't calculated this, so I can't give an answer, but it must be an immeasurably large number.

Then these bankrupt individuals, they are all forced to choose bankruptcy because they can't bear the burden of subprime loans. Their bankruptcy is not only a personal bankruptcy, but also the bankruptcy of the subprime credit system. Their bankruptcy will directly affect those subprime lenders.

Due to the bankruptcy of the borrower, the court will freeze all the assets of the bankrupt individual. In other words, until the court completes the liquidation, no subprime lender will be able to get even a single cent from these borrowers. This is undoubtedly a very serious blow to them. I believe that many small subprime lenders will go bankrupt as a result, which will in turn trigger a series of even more serious credit default swap problems.

Once there is a credit default swap problem with this debt, the credit crisis in the subprime mortgage market will evolve into a subprime mortgage crisis, and ultimately into a large-scale economic crisis.

It can be predicted that in this crisis, many companies will go bankrupt, thousands of people will lose their jobs, and New England will enter winter early.

Good. Thank you very much, Professor Delongke, for accepting our call. According to the latest news received by this station, the largest credit rating agency in New England will downgrade the credit rating of all subprime loans in view of this personal bankruptcy storm. The downward adjustment will exceed 40%, which means that all subprime loan contracts will lose their credit protection and become a high-risk investment field, affecting the currently very popular CDS market.

...

This is a program broadcast on the Northeast Finance Channel. At this time, Zhou Ming is lying on the bed in his room watching TV.

For Zhou Ming, the broadcast of this programme obviously meant that his plan was being implemented smoothly. Not only had the ethnic minorities in the Weida community made good use of their own experiences to spread the word, persuading their relatives and friends to start personal bankruptcies, but his speech to so many gangsters that day had also been very effective, and they had all taken the initiative to go to court to apply for bankruptcy.

Judging from the special programme on TV, this has probably caused a great reaction. After all, those taking out subprime loans are not just minorities and gangsters with insufficient credit ratings, but also many property speculators. Since they are in the property speculation business, their credit ratings are also insufficient, so they can only find a lending institution to take out a loan.

Now that so many people have filed for personal bankruptcy, anyone with a modicum of intelligence can see that in the near future, as their properties are liquidated and auctioned off, a large number of properties will enter the real estate market, causing property prices to plummet. They will no longer be able to engage in property speculation, and at the same time, they will have to pay high interest rates to the lending institutions. The end result will be the same as for these minorities: they will also choose to file for bankruptcy.

Suddenly, the phone by Zhou Ming's bedside rang. Zhou Ming picked it up and answered. It was Lin Muqing calling.

'That's great, I've already seen the news. There are a lot of people filing for personal bankruptcy. Ming, you really did it! Due to these bankruptcy filings, the subprime mortgage crisis is sure to take off, and Brighton Bank and the Adams family are going to go under! Ming, you've created another miracle!' said Lin Mucheng excitedly.

Zhou Ming smiled and said, 'A miracle, perhaps. After all, it was a lot of luck to be able to convince the ethnic minorities in the Vidda community and to meet this motel owner who runs the underworld. But it's still a bit early to say that the Brighton Bank and the Adams family are finished. I don't think they're that weak. In fact, there's still a lot to come, and it depends on the three families."

After Ming's words, Muqing Lin calmed down: 'I saw on the news that the credit rating agencies have sharply lowered the credit ratings of all subprime loans. I think the three families must have contributed to this.'

Zhou Ming thought for a moment and said, 'It's hard to say, but now that I've lifted the corner of the subprime mortgage crisis, they'd be stupid not to do something about it. So Muqing, I believe you'll soon be able to leave Rhode Island and return to Brighton, and I can leave this damn motel, and we can be together again.'

Lin Muqing blushed and spat at Zhou Ming, saying, 'Shame on you, who wants to be with you?'

Zhou Ming pretended to be disappointed at Muqing's arrogance and shyness, saying, 'Oh, so Muqing doesn't feel that way. It seems I was being self-absorbed. That's really sad...'

Zhou Ming's words had not finished when Lin Muqing immediately said, 'No, I do want to be with you!'

But as soon as Lin Muqing changed her words, she heard Zhou Ming's laughter. The clever her immediately realised something: 'Zhou Ming, you dare to lie to me? I don't want to talk to you anymore!'

Zhou Ming laughed out loud, and then Zhou Ming and Lin Muqing exchanged a few words of love before hanging up, but then they received another call, from Governor Edward.

'I never thought that the governor would call me personally, I'm really flattered!' Zhou Ming said.

Edward ignored Zhou Ming's sarcasm and said with emotion, 'You have already raised the corner of the subprime mortgage crisis. Whether as an ally or as the governor, I should have called you. It's really hard to imagine that you actually managed to do it!'

'Even the casual flapping of a butterfly's wings in the Brazilian rainforest can cause a tornado in the United States, so it's no surprise that I triggered the subprime mortgage crisis, not to mention that I did it for him,' said Ming. 'It's just that it's easy to trigger a subprime mortgage crisis, but how to control its subsequent development is the key. I'm only targeting Brook Investment Company for now, but how it will develop in the future depends on you big financial conglomerates and families.'

Zhou Ming did not say these words lightly, because it is indeed very easy to trigger a subprime mortgage crisis. As long as there is a loophole in the market that can be exploited, and as long as one works hard to exploit that loophole, with a little bit of luck, it is indeed very easy to trigger a crisis. However, after the crisis erupts, it is not something that can be controlled by hard work. It requires huge amounts of capital and social and political resources.

In short, it's like Zhou Ming's saying, 'I've started it, so you deal with the consequences.'

'What a cocky kid, but you do have the right to be cocky,' Edward said with a smile. 'Don't worry, we're all ready. You've done a great job starting this. I believe that in a week at most, the Adams family won't be able to take care of you anymore, and they might even come to you for negotiations.'

'That's really good news. I'll be waiting for the good news you'll bring me, Mr. Governor."

Zhou Ming hung up the phone after saying that, and then he turned his attention back to the TV. He saw the screen once again turn back to the entrance of the bankruptcy court. From the screen, Zhou Ming could see a long line of people applying for bankruptcy at the entrance. It seemed that there were a few people in suits walking next to the line, constantly saying something to those people, with a pleading look on their faces.

The pleading man is James from Brook Investment Company. He keeps walking in the queue, talking to his clients he knows: 'Why are you filing for bankruptcy? That's something only people who are so poor they can't afford anything else would do. You know that your income is enough to repay the loan, and you know that by doing this you'll only lower your credit rating even further...'

Before James could finish his words, someone asked him in return, 'If we don't file for bankruptcy, will our credit rating not be low?'

James couldn't answer, but these people wouldn't let up: 'And whether we pay your loan or not, the house will eventually be auctioned off, just like what happened in the Vidda community, so we might as well just file for personal bankruptcy first.'

'The incident at the Vidda Community was just an accident. Don't believe any rumours!"

James desperately tried to explain to them, but no one would listen to him. Everyone was still determined to go to court and file for personal bankruptcy, even though it didn't actually do them much good. At least they could settle all their debts.

In the end, James's desperate pleas were to no avail, and he was left sitting disconsolately on the steps outside the courthouse. The expression on his face said it all: loser.

Suddenly James had an idea. He took out his mobile phone and made a call. 'Cindy, did you tell your relatives to file for personal bankruptcy?'

The black woman on the other end of the line was Cindy, who readily admitted it. James immediately said, 'Cindy, why did you do that? I know I was in a bad mood last time, and I can apologise to you. I can also help you with your house. I'll ask all your relatives and friends to come home and not file for personal bankruptcy, okay? I beg you!'

'That's impossible!' Cindy said decisively. "James, I told you I'd make you regret it. I'll see you and your company go to hell!"

Cindy hung up the phone, leaving James on the other end, full of despair.