Financial Management And Financial Crisis

1404 Words Feb 26th, 2016 6 Pages
Since the financial crisis is the value of financial institutions or assets in one country or several countries drops rapidly, and it can affect the stability and development of the relevant country or region even the world economic. The causes of this situation should be well studied to prevent the recurrence.

This essay is discuss if the financial crisis that was globally experienced following events in 2008 is an example which can prove the financial engineering and corporate governance gone wrong and try to explain the reason.

The financial crisis can be also called financial storm. The nearest global financial crisis was started from 2007, evolved by the US Subprime mortgage crisis. The Subprime mortgage crisis is also known as credit crisis. It caused by the housing prices decline and many people did not have the ability to repay the loans. (Vyas, n.d.) The significant event during this crisis was that the US Treasury spent up to $200 billion to take over the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) which were on the verge of bankruptcy in the September of 2008. (Guillén, 2009) Because of the crisis, some investment banks go out of business during this period of time. Many other countries were also involved in this crisis, such as Greek and Iceland. According to Arghyrou, it is the instability in the global financial markets that lead to the Greek Debt Crisis. (Arghyrou and Tsoukalas, 2011)

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