The Financial Collapse Of 2007 / 2008

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 that happened during 2007-09 was considered the worst financial crisis in the world since the great depression in the 1930s. It leads to a series of banking failures and also prolonged recession, which have affected millions of Americans and paralyzed the whole financial system. Although it was happened a long time ago, the side effects are still having implications for the economy now. This has become an enormously common topic among economists, hence it plays an extremely important role in the economy. There are many questions that were asked about the financial crisis, one of the most common question that dragged attention was ’’How did the government (Federal Reserve) contributed to the financial crisis?’’

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.

A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.

There is no doubt that subprime lending was a major cause of the Recession. It was a tactic used by investment banks in order to get more money from unsuspecting homeowners. However, lenders found out that most of the people who were qualified to have a mortgage already had one. In turn, the lenders had to lower their credit criteria for people to take out a loan on a house. This is how the term subprime lending came to be in the financial world. As a result of subprime lending, the investors were able to make millions off of these mortgages. “ Many American homeowners bought houses they could not afford, signed into mortgage agreements they could not understand or which were misleading and took equity out of homes as if they were cash machines” (Cushman 1).

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,

I have always personally thought that the cause of most financial crises is created by the governments and high executive. Most people do not know that white collar crimes occur every single day, but they are not exposed to the news because this type of crimes is not as important as any other crime such as a murder, robbery, and so on. However, the public gets rob on daily basics and the government allows it. This is the reason why only a few people got convicted during the 1990’s and 2008 crises. My best example of government victimization is by taking a look at the economy of countries like Venezuela, Cuba, and many others. In these countries, the economy is extremely bad for regular people; contrary to the people that hold a position

The economic crash of 2008 was a difficult time for all of the people around us. This situation has impacted our country and what is around even to this day. It was a tough time for a lot of families and big businesses. This stock market crash was one of the worst the United States had ever had. Even to this day we are still trying to repair it what went down. Like the employment of jobs, the cost of our products, and homes that were taken away from families. The economic crash came from nowhere and it was a shock fro mainly families, especially the middle and low income families. This took many homes away from them and the job eventually leaving them with nothing. This had also hurt many foreign countries on their way, did trade and their investments. Many housing companies going down with this and also the way banks were running. Why and how did this all happen? This is one of the biggest economic crash in the United States that is still in the process of being repaired.

There is no doubt that subprime lending was a major cause of the Recession. It was a tactic used by investment banks in order to get more money from unsuspecting homeowners. However, lenders found out that most of the people who were qualified to have a mortgage already had one. In turn, the lenders had to lower their credit criteria for people to take out a loan on a house. This is how the term subprime lending came to be in the financial world. As a result of subprime lending, the investors were able to make millions off of these mortgages. People who qualified for a subprime mortgage usually had a credit score below that of 620. To make the subprime mortgage deal more customer friendly, the lending banks decided to have the people who qualified for these mortgages didn’t have to have a down payment. Normally, the down payment would be as much as 20%, but this made it easier for people to get mortgages without having to worry about how much money they needed at the beginning of their purchase. “ Many American homeowners bought houses they could not afford,

The U.S. subprime mortgage crisis was a set of events and conditions that led to the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. After U.S. housing sales prices peaked in mid-2006 and began their steep decline, refinancing became more difficult. As adjustable-rate mortgages began to reset at higher interest rates, mortgage delinquencies soared. Securities backed with mortgages, including subprime mortgages, widely held by financial firms, lost most of their value. Global investors also drastically reduced purchases of mortgage-backed debt and other securities as part of a decline in the capacity and willingness of the private financial system to support lending. Concerns about the soundness of U.S. credit and financial markets led to tightening credit around the world and slowing economic growth in the U.S. and Europe.

The housing market crash, which broke out in the United States in 2007, was caused by high risk subprime mortgages. The subprime mortgage crisis resulted in a sudden reduction in money and credit availability from banks and other lending institutions, which was referred to as a “credit crunch.” The “credit crunch” and its effect spread across the United States and further on to other countries across the world. The “credit crunch” caused a collapse in the housing markets, stock markets and major financial institutions across the globe.

It is almost mandatory that every company, institution, firm, organization, business or enterprise – small or huge – has to undergo a financial crisis. Once in a while, it must find it hard to balance its books of accounts. If the situation gets severe, then the organization may even close down. This paper will give a detailed review of one institution -The Lehman Brothers - whose financial crisis led to its fall (Wong & Smith, 2010). It will examine the beginning, the end, and the outcomes of the same. In addition to that, the report will also analyze the government policies that relate to the fall of the Lehman Brothers. In details, this paper covers the reasons for the crisis, the impact of the crisis on financial markets and institutions, the impact on the global economy, the response to the financial crisis (the bailout plan and the effect of it on capital markets), as well as the aftermath of the crisis that cause the collapse of this Company. In a way, this paper connects the knowledge I gain from the classroom to the current financial situation, to apply the concepts that I learn in this class, and to better understand the financial system in the United States.

Economic growth is mostly stagnated and has been since the global financial collapse of 2008. This collapse led people into different avenues of providing financially for their families and themselves, mostly due to the loss of jobs. In addition to that, people had surrendered to the idea that their financial futures would be threatened and that there is not secure job as that is a paradigm of the past. It appeared that the only viable option would be to start a business of their own. In an effort to minimize expenses most of the businesses that these people, who are known as entrepreneurs, are starting businesses in their own homes.

The recession and the credit crunch of 2008 have affected almost all the countries in the world. It has been known as one the worst financial crisis happened since the Great Depression of 1929 – 1930. This paper aims at comparing the economies of China and India in the view of the recession of 2008. India and China both are emerging economies of the 21st century. “The emerging market economies are characterized as transitional, which means that they are in the process of moving from a closed to an open market economy” (Siddiqui, 2009, p.1). Together, China and India accounts for a population of 2.5 billion people (Sree, 2013). Hence both the countries play a major

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