The subprime mortgage crisis and the possible effects on supplier integration strategies

The subprime mortgage crisis and the subsequent credit crunch have raised prices and reduced the availability of credit in markets worldwide. This paper will attempt to define and determine the causes of the subprime crisis, as well as the possible effects that it may have on the horizontal and vertical integration strategies of companies operating in the USA. Although some optimistic analysts believe that credit markets will stabilise by the end of 2008 or 2009, even this group felt that there will not be a return to the liberal spending practices that defined the years leading up to the credit crunch of late 2007. The vast majority of financial analysts reviewed for this research project felt that there is a persistent downturn of the credit marketplace, perhaps implying that a more dramatic change in supply‐demand relationships (increasing rates for the demand of oil‐based energy sources coupled with a much smaller increase in the supply of such energy) has resulted in the largest shift in pricing of risk and debt in the shortest period of time ever experienced in loan markets, thus indicating a true shift in the financial markets of which there is no return.