The Financial Crisis Of 2008 : Deregulation And Corruption

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.

Many factors that led to the crash of the financial markets in 2008. Liberals and conservatives have differing views on the reasons for this crisis. From 1980 to 2007, deregulation, HUD, the Community Reinvestment Act (CRA), and bank management pushing banks to make high risk loans caused the market to shatter. Hedge funds contributed a humongous portion of the market crash. A commission of conservatives and liberals was established to try get to the bottom of how the stock market crashed. The name of the commission to conduct this study is Financial Inquiry Commission.

The recession of 2008, which we are only just starting to come out of, happened as a result of a few major factors. The primary factor was the deregulation of banks during the Bush administration. Another factor was that banks offered loans without looking into the financial stability of borrowers or businesses. Also, credit unions, savings and loans, and banks entered into competition with each other. The Security and Exchange Commission, S.E.C., reduced requirements so that banks could pile up debts.

There are many research institutions that are quick to point the finger and blame one specific entity or event for the events that occurred during the economic decline in 2008; however, the entire situation cannot be put onto the shoulders of one company, or the faults of one industry. There were several causes that played into the financial crisis, but two causes stand out as the pre-dominant elements of the collapse of major financial establishments: manipulation of the housing market by two government-funded companies, and the greed of wealthy Wall Street bankers and investors who knowingly took advantage of the system.

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

The 2008 financial crisis had multiple causes but the most outstanding to me is the passing of the Gramm–Leach–Bliley Act. This act repealed Glass – Steagall which removed the safeguards that came between commercial and investment banks. It destroyed regulation between the two and gave unprecedented “innovation” which allowed millions of Americans to purchase homes they couldn’t really afford. This created the American housing bubble that eventually popped do to citizens being unable to pay for their new homes. The intial burst of the housing bubble resulted in the foreclosure of 860,000 homes in 2008. Another entity at fault for the recession would be the credit rating companies. They provided the means to the consumers to take out mortgages

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

In late 2007, America was hit with the most significant blow to its finance sector since the Great Depression. Upon careful retrospection of the nations economic policy since the Great Depression, many discovered that slowly but surely, America had been setting itself up for the “perfect storm” all along. Without question, it was evident that due to deregulation, excessive accumulation of debt (especially in the form of over leveraging), greed, treacherous decision-making, and obscure practices between financial institutions, America’s economy was brought to a screeching halt. While facing the impending failure of the country’s powerhouse banks, the federal government was forced to intervene, saving some banks, while merging or leading others to their demise. Additionally, the United States Department of Treasury was faced with rectifying the lack of credit available to fuel commerce, both business and personal. After jump-starting the nations cash flow with government assistance packages, the government introduced reform to oversee and limit corporations that are deemed “too big to fail” hoping to ensure that no such economic downturn should arise in the future.

What caused the financial crisis to happen? The origin of the crisis, the film argues, can be traced back to the 1980s, when the process of deregulation was eagerly implemented under the Reagan Era. Prior to the emergence of Reaganomics, the financial industry was tightly regulated following the Great Depression. Most of the banks were local and were prohibited from speculating customers’ deposits (brought by the Glass-Steagall Act), while the investment banks were modest and private. However, everything changed after 1980, when Ronald Reagan became president and the U.S economy entered a thirty-year phase of deregulation. Financial institutions, which included commercial and investment banks then embarked on the process of maximizing profit by making risky investments with the depositors’ money. By the end of the decade, saving and loans companies went bankrupt, causing tax payers to lose more than one hundred billion dollars. However, the government did not implement any reform and deregulation continued to take place under the Clinton

Credit rating agencies were giving anything that came across their desk AAA ratings in order to not lose out on competition, real estate agents and mortgage brokers were giving houses and loans to people who couldn’t afford them, and the major banks who held long positions on the mortgage-backed securities were knowingly holding worthless bonds at the expense of the American people. It was the perfect storm for a financial crisis, as there was no one saying “no, we can’t be doing this.” The banks were colluding with rating agencies to rate their securities well until they exited their long position, the rating agencies were receiving good business from the banks, and the mortgage brokers and real estate agents were too ignorant to realize what was going on on the macro

Economists cite a plethora of reasons on why the Global Financial Crisis started. However, most economists can agree that the bursting of the U.S housing bubble, irresponsibility practiced by regulators and financiers, greed of banks, lack of leadership from central banks, complex chains of debt, and the credit crunch led to what is referred to as the largest crisis since the Great Depression.

The 2008 world financial crisis begin the banking and housing sector, but spread like a contagion through the entire economy. Many date the beginnings of the problems far back before 2008, back to the historically low interest rates put into place by the Federal Reserve in the wake of the last financial crisis. Interest rates plummeted after the dot.com boom and bust, followed by the attacks on the World Trade Center. This enabled many borrowers to take out adjustable rate mortgages on homes they could not really afford, particularly after rates began to creep up again.

The origins of the financial crisis can be attributed to multiple inter-related factors. The biggest single contributor of the crisis, however, was the practice of

The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. There were many factors that contributed to the cause of The Global Financial Crisis and many effects that emerged, because the impact it had on the financial system. The Global Financial Crisis started because of house market crash in 2007. There were many factors that contributed to the housing market crash in 2007. These factors included: subprime mortgages, the housing bubble, and government policies and regulations. The factors were a result of poor financial investments and high risk gambling, which slumped down interest rates and price of many assets. Government policies and regulations were made in order to attempt to solve the crises that emerged; instead the government policies made backfired and escalated the problem even further.

The initial cause of the financial turbulence is attributed to the U.S. sub-prime residential mortgage market. The sustained rise in asset prices, particularly house prices, on the back of excessively accommodative monetary policy and lax lending standards during 2002-2006, increased innovation in the new financial instruments, unusual low interest rates resulted in a large rise in mortgage credit to households; particularly low credit quality households, the greed of investors’ for ever higher returns coupled with very minimal down payments, along with the dependence on major global rating agencies, allowed complex investments products to be sold to an