The 2007 Financial Crisis

The mortgage crisis of 2007 marked catastrophe for millions of homeowners who suffered from foreclosure and short sales. Most of the problems involving the foreclosing of families’ homes could boil down to risky borrowing and lending. Lenders were pushed to ensure families would be eligible for a loan, when in previous years the same families would have been deemed too high-risk to obtain any kind of loan. With the increase in high-risk families obtaining loans, there was a huge increase in home buyers and subsequently a rapid increase in home prices. As a result, prices peaked and then began falling just as fast as they rose. Soon after families began to default on their mortgages forcing them either into foreclosure or short sales. Who was to blame for the risky lending and borrowing that caused the mortgage meltdown? Many might blame the company Fannie Mae and Freddie Mac, but in reality the entire system of buying and selling and free market failed home owners and the housing economy.

In 2008, the American economy broke down. Known as the Global Financial Crisis, this is widely considered to be the worst financial crisis since the 1930’s when the stock market crashed and the Great Depression hit.

America has recently fallen into a great recession, and though some claim we are no longer in a recession, our country and has never quite bounced back. Our economy is fragile and unstable. “In June 2009….native born workers lost 1.2 million [jobs] (Herbert 565).” Businesses are afraid to hire more workers; for fear that consumers aren’t comfortable spending money quite yet. Consumers are afraid to spend money for fear that they won’t be earning any more. People who were once financially stable are barely getting by, some even homeless. This recession has been said to be equal to, if not worse than, the Great Depression. “The human suffering in the years required to recover from the recession will continue to be immense (Herbert 565).” Recovery may be happening, but is definitely an unstable process.

The financial crisis of 2007-2009 resulted from a variety of external factors and market incentives, in combination with the housing price bubble in the United States. When high levels of bank and consumer leverage appeared, rising consumption caused increasingly risky lending, shown in the laxity in the standard of securities ' screening and riskier mortgages. As a consequence, the high default rate of these risky subprime mortgages incurred the burst of the housing bubble and increased defaults. Finally, liquidity rapidly shrank in the United States, giving rise to the financial crisis which later spread worldwide (Thakor, 2015). However, in the beginning of the era in which this chain of events took place, deregulation was widely practiced, as the regulations and restrictions of the economic and business markets were regarded as barriers to further development (Orhangazi, 2014). Expanded deregulation primarily influenced the factors leading to the crisis. The aim of this paper is to discuss whether or not deregulation was the main underlying reason for the 2007/08 financial crisis. I will argue that deregulation was the underlying cause due to the fact that the most important origins of the crisis — the explosion of financial innovation, leverage, securitisation, shadow banking and human greed — were based on deregulation. My argument is presented in three stages. The first section examines deregulation policies which resulted in the expansion of financial innovation and

The financial crisis did not happen in a day or two, it was triggered by a variety of events that happened.in years ago. In year 1998, The Glass-Steagall legislation was repealed, it is a legislation that separated investments and commercial banking activities in the financial sector. This act then allowed banks in the US to act in both the commercial and investment fields, which allowed them to participate in highly risky business. This is somehow responsible for the mortgage-backed derivatives, which is a main cause of the

The financial crisis that put our economy on a downhill rocky road is known as the Great Recession of 2008. The U.S. Governments resolution to one the biggest panics was revolved around multiple bailout and fiscal measures. The fight to pull our weakening economy out of a dark hole left the American people with hope of advancing what gets thrown their way. The many bailout programs implemented by the U.S. Government can only hold the economy together for so long until were up to our knees in debt.

In 2008, USA experienced another tragic downfall when her market went down and unemployment rate charged up. Millions of workers lost their jobs; from the young, the old, the whites, Asians, Latinos, both men and women. Distress filled every household as prices rose and income fell. The whole country was in turmoil back then.

The stock market is what one would know as a collective group of buyers/sellers that trade stocks, also known as shares on a stock exchange. These securities are listed on the exchange itself and trade freely each and every day. On the exchange, stocks move hands day in and day out. Companies are able to get their stock listed on the exchange at any time that they want. There are other stocks, too...known as OTC stocks or over the counter stocks that go through a specific dealer. Larger companies tend to have their stocks listed on exchanges all throughout the world. Participants in the market can be anyone from your grandma, to retail investors, day traders, institutional investors, and so forth. One notable exchange is the NYSE; also known as The New York Stock Exchange. Moving forward, a stock market crash is when a decline of stock prices takes place throughout the stock market that results in a catastrophic loss of wealth via paper. The crashes are driven strictly by panic 9 times out of 10 a crash takes place. As a crash is happening, panic occurs; the panic keeps evolving and ends up like the snowball effect before you know it. A crash occurs when economic events take place. These events are always bad news... The behavior of traders follows, which leads to a crash when panic ensues. Crashes normally occur of a seven day period and may extend even further. Crashes happen in bear markets as the market is already weak to begin with. Once traders see a drop in prices,

On September 15, 2008, Wall Street entered the largest financial crisis since the Great Depression. On a day that could have been called Black Monday, the Dow Jones Industrial average plummeted almost 500 points. Historically prominent investment giant Lehman Brothers filled for bankruptcy, while Bank of America bought out former powerhouse Merrill Lynch (Maloney and Lindeman 2008). The crisis enveloped the economy of the United States, as effects are still felt today. Experts still disagree about what exactly caused the greatest financial disaster since the Great Depression, but many point to the repeal of the Glass-Steagall Act of 1933 as a gateway to the rise of extreme laissez-faire policies that allowed Wall Street to take on incredible risk at the expense of taxpayers. In the wake of the crisis, politicians look for policies that reign in the power of Wall Street, but the fundamental relationship between economic and political power has made such regulation ineffective.

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

An excess of regulation, rather than an insufficiency of it, was the principal cause of the recent credit crunch.

were reaping the rewards while taxpayers were inheriting the risk. In 1993 Congress met the opposition half way by slowly incorporating direct federal loans but still keeping guarantees in place for the banks. After the financial crisis of 2008, President Obama completely eliminated the middleman and fully implemented direct student loans (Kingkade). Although this stopped large banks from profiting off of government backed loans, it still didn’t reduce the supply of loans or the ease of obtaining them.

Our society seems to doing well since the financial crisis of 2008. The country is recovering from the Great Recession, unemployment is down and the global domestic product is up. People have jobs and are paying taxes. President Obama lowered our budget deficit and promised to make healthcare more available to all. On average, America is well on its way to recovery. But what about the people that slipped through the cracks of the financial stimulus plan? These are the people that lost their jobs, and subsequently their homes. These are America’s impoverished and homeless.

The Consumer Financial Protection Bureau, the agency created after the financial meltdown of 2008, has taken aim at the cash advance loan industry almost since the agency opened its doors. The CFPB 's latest attack is in the form of proposed rules that many people believe would "regulate cash advance loans out of existence." The proposed rules would apply to every lender whether they make online cash advances or operate a brick-and-mortar store. Throughout his campaign, Donald Trump repeatedly expressed his antipathy for the CFPB and the law that created the agency, the Dodd-Frank Act. Now that Trump has won the presidential election, many people are wondering whether the cash advance loan industry might benefit under his administration.

This chapter is about the background of 2007-2008 financial crisis. The 2007-2008 financial crisis has a huge impact on US banking system and how the banks operate and how they are regulated after the financial turmoil. This financial crisis started with difficulty of rolling over asset backed commercial papers in the summer of 2007 due to uncertainty on the liquidity of mortgage backed securities and questions about the soundness of banks and non-bank financial institutes when interest rate continued to go up at a faster pace since 2004. In March 2008 the second wave of liquidity loss occurred after US government decided to bailout Bear Stearns and some commercial banks, then other financial institutions took it as a warning of financial difficulty of their peers. In the meantime banks started hoarding cash and reserve instead of lending out to fellow banks and corporations. The third wave of credit crunch which eventually brought down US financial system and spread over the globe was Lehman Brother’s bankruptcy in August 2008. Many major commercial banks in US held structured products and commercial papers of Lehman Brother, as a result, they suffered a great loss as Lehman Brother went into insolvency. This panic of bank insolvency caused loss of liquidity in both commercial paper market and inter-bank market. Still banks were reluctant to turn to US government or Federal Reserve as this kind of action might indicate delicacy of