Is The Banking Crisis A Major Source Of Country Risk?

The financial crisis from2007 to 2008 is considered the worst financial crisis since the Great Depression of the 1920s and destroyed the U.S. economy severely. It led the housing prices fell 31.8%, the unemployment rate rose a peak of 10% in the United States. Especially the subprime market, began defaulting on their mortgage. Housing industry had collapsed. This crisis was not an accident, it caused by varies of factors. The unregulated securitization system, the US government deregulation, poor monetary policies, the irresponsibility of 3 rating agencies, the massed shadow banking system and so on. From my view, the unregulated private label mortgages securitization is the main contribute factor which led the global financial crisis in 2008.

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.

American debt held by households is rising ominously, plus our economic policies change. That debt balloon powered by radical income inequality will become the next bust. It drives by spending on domestic demand or more likely consumer spending not just by the wealthy, but by everyone else. An important explaining about the unity that emerged from our latest research has shown as relatively that ten percent were prosperous, saving, and investment in which natural and interests to find the path of them in the financial markets, but primarily ninety percent had borrowed. As the result many Americans concern about the financial crisis and the cartoon uses to sarcasm, irony, and logos to convey its message.

It is undeniable that the political has a great impact on the finance crisis in 2008. In this journal, the writers have brought up the practical reasons causing the biggest recession in the world. However, the root cause of the financial crisis stemming from the credit crisis and real estate in America. Real estate bubble increasingly growing had put the housing market in the USA and many European countries in danger. Cheap credit was the starting point for the real estate bubble, following by the imbalance of monetary policy of the U.S. Federal Reserve. Furthermore in 2007, a number of American credit institutions such as New Century Financial Corporation had processed procedures for bankruptcy. Some are leaving the depreciation of its shares

Apparently, the financial crisis that began in August of 2007 were the product of several minor issues such as poor risk controls, too much leverage, and an almost willful blindness to the bubble-like conditions in the housing market but the actual root cause was the collapse of the ethical behavior especially on the part of the top executives of the most financial institutions and the loss of any sense of fiduciary responsibility to the ultimate client.

The recent financial crisis has a huge impact on systemic Important Financial Institutions; it’s distressing effect can be felt in almost every business area and process of a bank. A fairly large literature investigates the impact of financial crisis on large, complex and interconnected banks. The great recession did affect banks in different ways, depending on the funding capability of each bank. Kapan and Minoiu (2013) find that banks that were ex ante more dependent on market funding and had lower structural liquidity reduced supply of credit more than other banks during crisis. The ability of banks to generate interest income during the financial crisis was hampered because there was a vast reduction in bank lending to individuals and

The intention of this essay is to provide an in depth and critical analysis of the financial crisis that took place between 2007-2009, in particular focusing on some key issues raised by the Foote, Gerardi and Willen paper ‘Why did so many people make so many Ex Post bad decisions?’ Whilst there were many contributing factors, it is clear that a specific few played a particularly dominant role, primarily the ‘Bubble Theory’, irresponsible regulation, toxic CDO’s and $62 trillion of CDS’s.

Upon analyzing the root causes of the financial crisis, I believe that the crisis could have been prevented by assuming the possibility it occuring, rather than projecting it as a far-fetched phenomenon. This is so as every aspect of the crisis, ranging from real estate agents selling clients homes they could not afford to investors partaking in questionable hedging activities was the result of individuals assuming that they could generate a profit without considering the consequences of their actions. Economist Phillip Das, as cited in a 2009 report by the Munich Personal RePec Archive elaborates on this theory by stating that “[f]inancial risks, particularly credit risks, are no longer borne by banks. They are increasingly moved

During the recent financial crisis, a number of banks were bailed out with public funds because they were considered "too big to fail". The level of state support was unprecedented1. While this may have been necessary to prevent widespread disruption to the financial markets and real economy, it is clearly undesirable for taxpayers' money to be used in this way at the expense of other public objectives. In the future, the financial system must be more stable and banks must be permitted to fail in an orderly manner, so that government bail-outs are not needed.

Greece’s financial crisis has been in existence for almost two decades, and unfortunately is still widely unknown what has caused this prolonged catastrophe. The general population does not necessarily know that this economic crisis originates to a mistake made years ago, not due to the recession in 2008 that an abundance of countries around the world suffered. Greece intended to join the Eurozone, a group of European Union nations whose currency is the euro, in 1999. Initially, Greece was denied admittance due to its poor economic standing. After approximately three years, Greece was able to pose a fabrication of its own economic success, constituting a healthy economy, and meeting all financial goals that existed (Hahn). Once admitted into the Eurozone, Greece maintained the lie they initially had created in order to keep the euro as its currency. As anticipated, Greece’s budget deficit increased exponentially and soon led Greece into a recession, in which promulgated the truth of its economic stability. Greece is at fault for its own economic crisis and if it did not join the Eurozone, there is a large probability Greece would be an economically stable country.

Low interest rates and large inflows of foreign funds created easy credit conditions. Subprime lending contribute to increase the housing demand.This fueled rising house prices.This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates. This led to a building boom. Easy credit encouraged borrowers to obtain ARM. If borrowers could not make the payments ,they would try to refinance. Refinancing became more difficult, when house prices began to decline in USA. Borrowers found themselves unable to afford higher monthly payments ,then default. This places downward pressure on housing prices.

‘Observers warned for well over a decade that the EU was ill-prepared’ (Pisani-Ferry & Sapir, 2010) for a Financial Crisis if one was to occur. This was certainly the case as Europe was engulfed in the financial crisis. The spreading of the credit crisis across Europe, originating from The USA, exposed Europe’s weaknesses and tested its strength (Sayek & Taskin, 2014). This paper reveals how lack of regulation and supervision alongside with banks who let their solvency and liquidity ratios run too low, which consequently resulted in the financial crisis. Furthermore, paper examines how the financial crisis solution varies with the macroeconomic structure of the economy.

The roots of Greece’s economic complications spread deep down into the recesses of history. In 2001, these deep rooted issues were forgotten and hid from the rest of the Eurozone after the government joined the Eurozone by dropping the Drachma and adopting the Euro. The initial adoption of euro by entering the Eurozone, Greece’s economy grew rapidly on average of 4% annually, a rate extremely alarming for the sure fact that it was twice the European Union average. On top their economy growing, interest rates were low, unemployment was dropping, and trade was at an all-time high. Outsiders would be led to believe that Greece entering the Eurozone was blessing, providing a needed shot in the arm to their Country’s economic wellbeing; however, these promising indicators masked horrible fiscal governance, growing government debt and declining current account balances.( EXPLAING CA ACCOUNT) Greece was banking on the rapid economic growth to build upwards on highly unstable foundations but were unable to grow as intended. In 2008, the dark day most were anticipating happened, the Greek Debt Crisis. Upon hearing word of the crisis, global financial markets went into a major panic on fears that the crisis would spread. It became a contagion that spread to other Eurozone members, with the most serious affected countries being those that were already having some economic troubles of their own Portugal, Italy, and

Companies are facing a highly uncertain environment due to financial-crisis and global economy. Regardless high-competitiveness markets, organizations foresee as a priority become an intelligent enterprise leveraging people, process, data and technology through establishing strategic plans. The strategic planning is a complex process of collectivity efforts between executives, middle managers and employees. Organizations endure several factors during this practice depending of the maturity life cycle, complexity, sector and clear definition of the future stage.

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.