Panel 1 The Credit Crunch fallout What it means for us So what happened Bear Stearns flags problems Panel 2 Debt spiral started Revaluations, recapitalizations Falling share prices, collapses NZ rates up 1% over late 2007 Panel 3 Then Bear Stearns collapsed Fed bails out Fannie, Freddie Fed lets Lehman fail Fed rescues AIG today Panel 4 So where to from here The credit crunch is not over Foreign interest rates higher Economic growth slower Panel 5 Mortgage rates back at 8.8% But would have fallen more Net cost around 70 bps $30/wk on $200k mortgage Panel 6 RBNZ to cut OCR 50bps in Oct But mortgages may be stuck Net effects is rates 1% higher Than would have been the case About $40 a week Panel 7 But what about the economy Will this be a depression? No Extended recession instead Banks more robust Trading systems freer More flexible exchange rates Panel 8 Falling asset prices House prices down further Recession lasting into 2009