The Economic Crisis Of 2008-2009

1818 Words Sep 2nd, 2014 8 Pages
The recent economic crisis of 2008-2009 that started in United States of America rapidly spread around the world due to the integration of the financial markets and the simplicity for investors to move throughout such markets. Therefore, countries had to deal with the economic effects of said crisis from a macroeconomic and regulatory perspective .
From a regulatory perspective, governments realized the importance of the Prudential Banking Regulation and Supervision (PBRS) as a mechanism to control financial institutions and protect customers. However, in pursuing that purpose, regulators in the European Union (EU) and in the United States of America (USA or US) omitted a key aspect of the PBRS: incentives for the financial institutions to be competitive and provide a quality service to their clients. This essay will explain the main aspects of the crisis, the concept of PBRS and the way that the EU and the USA implemented it to reduce volatility in their markets and calm them, in order to describe the aspects left behind by the regulators and their possible outcomes.
Before 2008, the US economy had a boom in the real estate market, where the prices were raising fast and quickly. This opportunity was used by financial institutions to give credit to people regardless of their credit history. The scheme used was simple, if someone could no longer afford the payments on their mortgage, the bank could either sell the property (in which case it will be a full payment for the…
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