Financial Crisis 2008

In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and AIG. These collapses not only influence own countries but also international area. Hence, the intervention of governments by changing and

“By the end of 2007, real house prices had fallen by more than 15 percent from peak.House prices in many of the most over-valued markets, primarily along the two coasts, had fallen by more than 20 percent. Furthermore, the rate of price decline was

A mortgage meltdown and financial crisis of unbelievable magnitude was brewing and very few people, including politicians, the media, and the poor unsuspecting mortgage borrowers anticipated the ramifications that were about to occur. The financial crisis of 2008 was the worst financial crisis since the Great Depression; ultimately coalescing into the largest bankruptcies in world history--approximately 30 million people lost their jobs, trillions of dollars in wealth diminished, and millions of people lost their homes through foreclosure or short sales. Currently, however, the financial situation has improved tremendously. For example, the unemployment rate has significantly improved from 10 percent in October of 2009 to five percent in

In 2008, a number of Banks, Financial Institutions and Non-Financial institutions failures sparked Financial Crisis or as some economist call “The Great Recession” that efficiently froze the entire world Financial institutions,

The Recession of 2008 was caused by two major faults: the use of subprime lending and changes in banking culture leaning towards self interest within the banking industry.

The near-collapse of the financial system in the United States was the most substantial economic crisis in the U.S. since the Great Depression of the 1920s and 1930s. Since the crisis began in late 2007, more than 6 million Americans had lost their jobs, large and important financial institutions failed, and trillions of dollars in savings and retirement accounts had been lost. It is generally accepted that problems in the United States housing market are at the root of the current United States and global financial crisis. Regardless the causes and responsibilities, what is clear is that the result is a seriously weakened global financial system. It is important to thoroughly study the causes and consequences of the U.S. financial crisis and

Economists cite a plethora of reasons on why the Global Financial Crisis started. However, most economists can agree that the bursting of the U.S housing bubble, irresponsibility practiced by regulators and financiers, greed of banks, lack of leadership from central banks, complex chains of debt, and the credit crunch led to what is referred to as the largest crisis since the Great Depression.

The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. There were many factors that contributed to the cause of The Global Financial Crisis and many effects that emerged, because the impact it had on the financial system. The Global Financial Crisis started because of house market crash in 2007. There were many factors that contributed to the housing market crash in 2007. These factors included: subprime mortgages, the housing bubble, and government policies and regulations. The factors were a result of poor financial investments and high risk gambling, which slumped down interest rates and price of many assets. Government policies and regulations were made in order to attempt to solve the crises that emerged; instead the government policies made backfired and escalated the problem even further.

Economists and scholars spend years dissecting financial markets and evaluating the causes of booms and busts. Throughout United States history there have been multiple economic booms that were underestimated and followed by recessions. In the situation of the 2007-2008 global financial crisis many culprits have been identified as causes, such as loose monetary policy, credit booms, deregulation, over complexity, and greed. Since the economic boom was solely dependent on weak policies and misconceptions, this leads me to believe prevention was possible with adequate regulatory policy, risk assessment and clarifications for commercial banks.

There has been a debate for years on what caused the Financial Crisis in 2008 and if there was one main cause, or a series of unfortunate events that led to the crisis. The crisis began when the market was no longer funding many financial entities. The Federal Reserve then lowered the federal funds rate from 5.25% to almost zero percent in December 2008. The Federal Government realized that this was not enough and decided to bail out Bear Stearns, which inhibited JP Morgan Chase to buy Bear Stearns. Unfortunately Bear Stearns was not the only financial entity that needed saving, Lehman Brothers needed help as well. Lehman Brothers was twice the size of Bear Stearns and the government could not bail them out. Lehman Brothers declared bankruptcy on September 15, 2008. Lehman Brothers bankruptcy caused the market tensions to become disastrous. The Fed then had to bail out American International Group the day after Lehman Brothers failed (Poole, 2010). Some blame poor policy making and others blame the government. The main causes of the financial crisis are the deregulation of banks and bank corruption.

The fourth and final threat facing our economy is the necessity of short-term loans. In an effort to reestablish tangible capital, banks are beginning to cut back on short-term loans. “If the short-term commercial paper and money markets were to break down, the economy could go into a severe collapse because solvent and profitable businesses would be unable to attract working capital” (Sachs, 2008). This kind of collapse in financial liquidity is the basic reason why the United States economy fell by around twenty-five percent during the Great Depression (Sachs, 2008). Already, some of the biggest names on Wall Street have disappeared into thin air. Some attempts have been made to bring liquidity back to financial institutions.

The 2008 financial crisis was one of the worst economic times since the 1929 Great Depression. It led a worldwide economical, social, and political instability that shook the very foundation of the term “laissez-faire”, or free market. Millions of people around the world lost their homes and their jobs, while large corporations and entire countries were at the brink of insolvency. Others, who are as unfortunate, lost their life savings and pension funds. But it is important to question what led to the events toward the collapse of the world wide financial system.

According to the specialists, there are many reasons for this global financial crisis. We try to focus some prime reasons behind this

In this essay, we are trying to look at the factors responsible for the global financial crisis in 2008-09 which started in US and later spread across the world. By now, a lot of studies have been done on the global financial crisis of 2008. We explain briefly the role of the financial engineering which leads to combination of various financial securities, the actual risk of which is not clearly assessed and hence leading to the financial crisis. There were also some serious lapses in regulation and failure of the rating agencies in assessing the risks assumed by the financial products which accentuated the crisis.

The main cause of the 2008-9 financial crisis was caused by the collapse of the housing bubble within the USA. But the housing bubble was created many years earlier. The Federal Reserve in the early part of the 2000's reduced its interest rates down from 6.5% to 1% within four years. This reduction in rates was applied due to several events happening in the US economy at that time. Firstly the attacks on the world trade center and the recession experienced had reduced taxes, which left a huge deficit in the federal budget as well as the expensive attacks into Iraq & Afghanistan. The US was also worried about deflation due to a decline in asset prices, which was forcing companies to