Global Financial Crisis: U.S, Greek, Pigs

In order to encourage people to buy more houses and boost the real estate market, the homebuilders, financial lenders, and the government created new financial instruments of calculation that were not researched properly. Lenders sold mortgages to investors that allowed the risk of default to be covered even though the mortgage was in a financial stretch for the borrower. Borrowers did not read the fine print and made decisions that they could not afford. The major banks Federal and otherwise, kept the interest rates low causing investors to take risks to get high returns in the short term, disregarding the long terms security of the whole process.

The outbreak and spread of the financial crisis of 2007-2008 have caused the most of countries into severe economic difficulties and also created an adverse impact on the global economy. The beginning of the financial crisis is defaults in the subprime mortgage market in the USA. Although the global economy seems to recover since 2009, the impacts of the crisis still affect many countries until now. This essay focuses on the background and impacts of financial crisis, and the learning from the movie The Big Short.

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

The recent mortgage crisis in the US was unprecedented. It led to a massive clampdown of financial institutions, occasioning one of the worst financial melt-downs the US has ever faced (Jaffe, 2008). Quite naturally, it would be necessary to examine the cause of the crisis in order to draft prophylactic measures that would prevent the same financial disaster in the future. This paper will discuss the events that led to the mortgage crisis.

In the lead up to the current recession, when the real estate market began to fall, there were so many investors shorting stocks and securitized mortgage packages that were already falling, that the market simply fell further. There were no buyers at the bottom, and the professional investors made millions off of the losses of others. Beyond this, there was no real federal regulation for securitized mortgages, since there was no real way to gauge the mathematical risk of any given package. This allowed the investors to take advantage of the system and to short loans on real people’s homes. Once these securities were worthless, many of the homebuyer’s defaulted on their mortgages and were left penniless. No matter from which angle this crisis is looked at, the blame rests squarely with the managers who began the entire cycle, the ones who pursued the securitization of mortgages. Their incompetence not only led to the losses of Americans who have never invested in the stock market, but to losses for their shareholders.

Unfortunately, the mortgages would take a turn for the worst; thus, resulting in investment funds lost and the inability to repay the loans that they borrowed from the banks (Isidore, 2008). Left with nothing, the banks were forced to declare the loans as unrecoverable, reduce the bank’s reserve, and limit their ability to generate new loans (Isidore, 2008). These actions destroy the economy because both businesses and buyers need loans to pay for investment expenditures and finance consumption (Isidore, 2008). An early problem was “ mortgage-backed security”. According to AP Economics 19 edition, “ Mortgage- backed securities are bonds backed by mortgage payments”(Brue). In order to create mortgage- backed securities, lenders begin by creating mortgage loans (Brue). When they do, the lenders combine hundreds of loans into one and sell them off as bonds; basically selling the right to regain all future payments (Brue). In the end, banks receive an individual payment for the bond. Bond buyers recover the mortgage payments as the gain on the investment (Brue). As first, it seemed like a good decision on the bank’s party because it moved any future default risk on those mortgages to the buyer’s bond (Brue). Unfortunately, they fail to realize that they had lent the significant amount of money they got from investment funds to selling bonds (Brue). Moreover, the banks bought huge amounts of

Financial Crisis of 2007-2008 originated in the United States spread to the financial systems of many other countries, including CIS countries, by means of the domino effect. Bankruptcy of one of the largest Americans Bank, Lehman Brothers Holdings PLC, in someway was a launcher of this global crisis the scope of that can be compared with the Great Depression of the 30s of the last century. No one could have even believed that a crisis in the local market of subprime mortgage loans in the USA would have such enormous affect on the financial systems over the world and crash banking sectors of many countries one by one.

The financial crisis that occurred in 2007-2008 is narrowly related to what happened with the housing market and the foreclosure crisis. In 2006, the housing market peaked due to newly available loans such as interest adjustable loans, interest only loans, and zero down loans for people with low-income jobs. Housing prices were increasing radically and new homeowners were taking out mortgages that they would be unable to pay for in the future, all in order to be able to afford homes with such steep real estate value. By 2007, things began to go downhill. Interest rates had begun to rise steeply, mortgage companies had to file bankruptcy, and banks across the country required bailout funds from the U.S. Treasury in an effort to recover

Financial crisis is really a major concern for all economies in the world. Every time a crisis occurs, companies, banks and financial institutions should draw their own lessons, because if the lessons are not recognized, they may still go on the trail of failure of

The current economic-financial crisis was indeed caused by the simultaneous occurrence of events in different parts of the world that all had a negative effect. These events are subtly different and therefore it is common that only one event is held responsible for the crisis. In reality, the world economy became critical due to the mix of four major events: 1) the unrestrained greed of financiers in the U.S. and U.K., which transformed bad mortgages into toxic financial assets 2) the habit of getting deeply indebted in the U.S. and U.K., 3) the excessive liquidity in Europe, 4) the real estate bubble in the U.S. and some European countries (Thomas, 2011) At the beginning of the financial collapse in the United States, many commentators, among which was the President of the Federal Reserve, hastily affirmed that the situation would only affect the United States and at most, the UK, where the banks,

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 Housing Market of 2007 has been described as one of the worst financial crisis since the great depression. Not because the actual hit of the crisis, but because of the lingering effects that still plagues the United States and other countries today even in 2015. The United States economy was not economically prepared for the crisis that presented itself in 2007. This financial crisis hit a variety of areas such as the housing market which seemingly was one of the major causes of the financial.

The impact of the financial crisis in 2008 is so far , it has resulted in various industries have revived a shock, even many large companies have been forced into bankruptcy.Inflation is a result of the decline in the quality of life, the weakening of people 's ability to pay. The outbreak of the financial crisis from the United States and then spread to the world,so this essay analyzes the reason of the US financial crisis, it is equally applicable to the countries in the world and take warning,that is the lack of supervision of financial institutions in the United States.

Just after ten years of Asian financial crisis, another major financial crisis now concern for all developed and some developing countries is “Global Financial Crisis 2008.” It is beginning with the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. (Global issue)

In relation to the increase in house’s price, the rise of financial agreements such as mortgage-backed securities (MBS) and collateralized debt obligations (CDO) encouraged investors to invest in the U.S housing market (Krugman, 2009). When housing price declined in the U.S, many financial institutions that borrowed and invested in subprime mortgage reported losses. In addition, the fall of housing price resulted in default and foreclosure and that began to exhaust consumer’s wealth and