Financial Markets and Institutions
Financial Markets and Institutions
6th Edition
ISBN: 9780077641825
Author: SAUNDERS
Publisher: Mcgraw-Hill Course Content Delivery
bartleby

Concept explainers

Question
Book Icon
Chapter 24, Problem 1DYU
Summary Introduction

To discuss: The reason for the rapid growth and subsequent decline in loan sales over the last three decades.

Expert Solution & Answer
Check Mark

Explanation of Solution

Many of these loans have been priced far below their original book value, i.e. they have been listed as distressed loans (loans traded on the dollar below 90 cents). Distressed loan sales, caused by an economic slowdown, rose from 11% of total loan sales in 1999 to 36% in 2001, and 42% in 2002. Distressed loans, however, remained high, more than 20%. Distressed loans in 2007 accounted for only 9 percent of total loan sales and in 2008 they were below 8 percent of all loan sales. The country U economy continued to struggle in 2011 and 2012, and growth in sales of loans remained flat. Although the economy slowed in 2007 and 2008, although sales of loans rose to over $500 billion, sales of distressed loans remained low.

Although this industry has existed for many years, it grew slowly until the early 1980s when it entered a period of rapid growth, primarily due to the expansion of highly leveraged transaction (HLT) loans to fund leveraged buyouts (LBOs) and mergers and acquisitions (M&As). Nevertheless, the number of distressed loans dropped dramatically in 2011 and 2012, respectively, to 8.7 and 5.5 percent, as many financial institutions had already sold off their distressed marketable loans in 2009 and 2010. Loan sales slightly decreased as the country U economy started to improve in 2010. The volume of loan sales declined dramatically in the early 1990s as well as the decrease in LBO and M&A activity.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Text book image
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:9781260013962
Author:BREALEY
Publisher:RENT MCG
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Text book image
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Text book image
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Text book image
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education