The subprime crisis is one of the worst financial crisis since nineteen twenty nine .The subprime crisis refers to the rising number of defaults on US subprime mortgages. Basically, US mortgage companies sold a lot of inappropriate mortgages to people on low income and poor credit histories. Rising interest rates, and falling house prices are causing many of these mortgage owners to struggle with repayments. Therefore, many mortgage companies have lost significant amounts of money. Some of the leading US subprime mortgage firms have gone under and bankrupt. If it was just mortgage companies who went bankrupt, it wouldn’t be so much of a problem. However, many of these mortgages were financed through securitization. Basically, the mortgage companies would lend the money to homeowners but would finance the mortgage loan by selling ‘mortgage bundles’ to other financial institutions. Basically, mortgage loans were financed by many different financial companies, not just the mortgage companies. Therefore, many banks and financial institutions have been left large losses resulting from losses in the subprime markets. The consequence of this is that many banks are bankrupt as Lehman Brothers or have cash flow problems and are now reluctant to lend money. In particular they are reluctant to buy any bundles of mortgage debt. Therefore, we have a shortage of funds in the capital markets. The consequence of this shortgage of funds is to increase the cost of borrowing. Therefore, many loans and mortgages will become more expensive because of rising bank rates. Furthermore, this shortage of funds has precipitated a decline in consumer and investor confidence. It has been a contributing factor to the decline in world stock markets. When will the subprime crisis end? Unfortunately, there are more mortgage deals coming to the end of their introductory period. This means that when the rates increase, there are more people at risk of defaulting. This could cause a further...