Financial Crisis 2008

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Banking Academy | City University of Seattle |

CORPORATE FINANCE

THE GLOBAL FINANCIAL CRISIS 2008 Group’s member:Nguyễn Như Nam (C)Phan Thu AnNguyễn Thùy DungHoàng Bá SơnNgô Thị Ánh TuyếtDate: 28/11/2014 |

AbstractIn 2008 the world was fell into the worst financial crisis since the Great Depression of 1929-1933. Although this crisis has gone, however, its consequences for the economy of many countries is very serious, even now many nations are still struggling to escape difficulty. Just in a short period, the crisis originating from America has spread to all continents. It led to a series of serious consequences such as the falling in stock markets, increasing in unemployment rates, large financial institutions had been
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Prior to formally entering the financial crisis, a range of signs forecasting this event had happened around the world. Problems with short-term debt funding and mortgaged assets were not limited to the United States, which is also the underlying cause of the financial crisis (Stoeckel, 2009). In 2001, the U.S economy fell into recession after the dotcom crisis and the terrorist event on September 11. To encourage the consumption, the central bank had lowered interest rates. The result was that with interest rates so low, investment and consumption became too easy, the U.S financial markets rapidly back and created "real estate bubble". Started from the housing market, the crisis quickly spread to the entire U.S financial system bank. In 2007, the 4th biggest bank in the U.S, name Lehman Brothers was under pressure. Lehman tried many different ways to save itself such as raise capital, sign a deal with Morgan Stanley and Bank of America, merger with Barclays but none of it worked ("Financial Crisis 2007/2008 Overview," 2011). From here, everything was ready for the crisis explosion in September 2008.
2. Reasons
There are so many reasons lead to global financial crisis in 2008. In this case, I want to mention to seven main causes which directly promoted financial collapse. 2.1 The housing bubble
From 1890 to 1997, the real price of housing in the U.S. remained relatively stable. When prices peaked in 2006, the average price
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