Failure of Three Regulation in Financial Crisis Essay

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Since the year 2008, many countries had been suffered from a financial crisis or Hamburger crisis, because of the mistaken policy, complex financial system etc. which cause a severe shock to the financial system globally. From this impact, the federal government of United State of America (USA) and other countries had injected a large fund for retrieving this situation significantly. Therefore, it can be explained that understanding the main causes of the financial issue can assist each country to clarify problems. The purpose of this essay is to elucidate regulatory failure in 3 major types: first, misguided intervention in the U.S. second, failure of financial risk management, next, the lack of transparency regulation in private and…show more content…
Also, the US GDP increased nearly 25 percent during 2006 to 2007. During the lowest interest rate, people used credit to own a house, credit cards or car. The economic system was shifted to a high level as same as the increasing of household mortgage debt has rose to 75 percent during 5 years (2000-2005). It can be explained that US household received more chances to own a houses, housing market had been promoted considerably. It seems to be good news for global financial market, especially US government, because of the positive result which was responded by homebuyer and investor hastily. On the other hand, hiding some information such as a long term effect from interest rate, the ability to pay debt, and the fluctuation of housing market, most borrowers and investors could not know both sides information (It is called ‘Moral Hazard’). Banks and non-banks needed to gain more profit neither borrowers could not pay a debt nor had a financial problem , and US government only concerned about the increasing of economic system and GDP rate. Even though, banks would be suffered from the increasing number of poor-credit that were unable to pay a debt (sub-prime borrowers or NINJA (No Job, No income, assets), fortunately banks could sell a list of sub-prime borrowers to Fannie Mae & Freddie Mac or non-banks. Unluckily, the housing demand could not stand at the peak for long time. A housing demand and a
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