Economic Tsunami

DEFINITION of 'Economic Tsunami'

A term used to describe a set of economic forces that are propelled by a single triggering event and which creates significant financial distress and destruction. As with a natural tsunami, in an economic tsunami the resulting effects can be felt far and wide, across numerous geographic regions and/or industrial sectors.

BREAKING DOWN 'Economic Tsunami'

For example, in 2008 the subprime mortgage meltdown in the U.S. created an economic tsunami that effectively froze world credit markets. The resulting impact was devastating and included the government takeover of the secondary mortgage market giants Fannie Mae and Freddie Mac, the collapse of investment bank titans Bear Stearns and Lehman Brothers, the bailout of insurance giant AIG and near-bankruptcy of the country of Iceland.

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RELATED FAQS
  1. How does Fannie Mae (FNMA) make money?

    Fannie Mae is a government-sponsored enterprise (GSE) established in 1938 to expand the flow of mortgage money by creating ... Read Answer >>
  2. How do I apply for a loan through a government agency?

    I want to apply for a home loan with Freddie Mac or Fannie Mae. I am not having much luck. Where do I apply?  ... Read Answer >>
  3. When did the real estate bubble burst?

    Collapsing home prices from subprime mortgage defaults and risky investments on mortgage-backed securities burst the housing ... Read Answer >>
  4. Why do bankers incur risk when underwriting?

    Learn why investment banks take on risk when underwriting. Explore examples of investment banks that have underwritten assets ... Read Answer >>
  5. Are mortgage-backed securities backed by any guarantees?

    Actually, any mortgage-backed security (MBS) guarantee depends on who issued it.To review, an MBS is a security, created ... Read Answer >>
  6. Can I buy a house directly from Fannie Mae (FNMA)?

    Yes; you can buy homes directly from Fannie Mae. Fannie Mae (the Federal National Mortgage Association, or FNMA) is a government-sponsored ... Read Answer >>
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