The Financial Crisis Of 2008

“One diverse population that has continued to increase over the quarter of a century is composed of people who are homeless” (Baggerly & Zalaquett, 2006, p.155). Homelessness has become a growing problem in society because more and more people are finding themselves to be homeless and not knowing where to turn. Many people do not

A big misconception about poverty-stricken people is that they are lazy and are living off welfare. While it may seem like America spends a lot of money on people who are unable, or unwilling, to provide for themselves, only “about

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 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,

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

The turmoil in the financial markets also known as the financial crisis of 2008 was considered the worst financial crisis since the Great Depression. Many areas of the United States suffered. The housing market plummeted and as a result of that, many evictions occurred, as well as foreclosures and unemployment. Leading up to the financial crash, most of the money that was made by investors was based on people speculating on investments like real estate, stocks, debt buying, and complex investment tools instead of actual tangible products that people purchased or needed. There are a number of dangers that arise when investors make large sums of money that are not tied to the actual value of a product and investors should not be able to make substantial profits off of the misfortune and poor choices of others. Those practices are very unethical and there should have been an increase in government intervention after the financial crash of 2008. The financial crash of 2008 was result of deregulation and male dominance in the financial services industry.

The financial crisis of 2008 did not arise by chance. The meltdown was precipitated by systematic striping away of the New Deal era policies of bank regulation. Most notable of these deregulatory acts was that of the Gramm-Leach-Bliley Act of 1999. This bill repealed the legislation which held commercial banks and investment banks separate. As the beginning of the 21 century approached many bankers clamored for an end to the policy of the “firewall” between Investment and commercial banks. Gramm-Leach-Bliley Act of 1999, sought to create more competition in the financial services industry. The policy, however, lead to the conglomeration of many corporate entities as banks had the capital to invest (in the form of consumer deposits) in a

During the lead up to the financial crisis of 2007-08, a term was coined to describe what was happening in the financial markets. The term was: Shadow Banking System. The creation of the term was attributed to economist and money manager, Paul McCulley, who described it as a large segment of financial intermediation that is routed outside the balance sheets of regulated commercial banks and other depository institutions (St. Louis Fed). In simpler terms, institutions that are in the shadow banking system are not regulated like commercial banks, and carry more risk due to their investments. Examples of shadow banking institutions are money market funds, mutual funds, hedge funds, etc. During the early 1990s, most American citizens didn’t know or never heard of money market funds or mutual funds; typically, the only people who knew of the “shadow banking system” were most likely senior officers at the big banks or individuals who were experts in the financial markets. However, that all changed. At the turn of the century, the shadow banking system started to gain steam and was growing at a faster rate than traditional banks. At the peak of its growth, right before the financial crisis, the shadow banking system, in terms of liabilities, was about 1.5-2 times larger than traditional banks (St. Louis Fed).

The world before the financial crisis of 2008 had stability. Iceland in 2000 was viewed as the perfect place to live and have your family grow. Iceland had clean energy, high standard of living, jobs, and low government debt. Iceland was a place were children played and parents laughed and enjoyed their life. Everyone lived well; Iceland was the role model of finance, until it all melted away. Iceland let giant corporations come into its territory and exploit its geothermal and hydroelectric resources and its banks became so large to where their banks became larger than their economy, impossible to bail out. The banks became unruly where the people even supposed to regulate the bank one third of them worked for the bank. The cause of the

The financial crisis of 2008 was the worst economic disaster since the Great Depression. It caused the collapse, take over, merging, or buying out of financial services firms and banks such as, Lehman Brothers, Merill Lynch, Wells Fargo, Goldman Sachs, AIG, Royal Bank of Scotland, Fannie Mae and Freddie Mac. The “Big Three” credit rating agencies, Standard & Poor’s, Moody’s, and Fitch Ratings, were at the helm of the financial crisis of 2008 because they were all found of wrongly assigning triple- A securities ratings to mortgages and debt assets that were way below “investment grade” level, which greatly contributed to the growing financial crisis. The ensuing result of the financial crisis of 2008 was the Great Recession, a period of great economic decline in America and the rest of the world. The financial crisis and Great Recession were triggered by subprime mortgages and mortgage backed securities, known as Collaterized Debt Obligations (CDOs). Mortgage-backed securities are a form of an asset-backed security that deals with different type of mortgages, while subprime mortgages are mortgages that are loaned out to people with low credit scores. CDO’s are very complex because they are built into different levels, known as tranches, that consist of various types of assets. The tranches of CDO’s are structured on the basis of risk, with the lowest credit rated tranches holding the highest amount of risk. A demand for mortgage-backed securities and subprime mortgages

The financial crisis of 2008 was one of the largest financial meltdown rivaling the Great

The financial crisis of 2008 can be attributed to a number of frivolous political actions and unrealistic policies. It is arguable that hearts were in the right places but minds were elsewhere. The objective policy makers strived towards was to construct mortgages, which were more attainable amongst low-income individuals and families. Ideally in the perfect world, everyone would be able to afford the American dream of owning a home. Unfortunately, reality poses that this is not practical by any means. This politically motivated move was ultimately not economically sound. Not only were sub-prime mortgages being purposefully given out, but also interest rates were compressed to unsustainably low percentages. The Federal Reserve’s Chairman, Alan Greenspan was partly to blame for this.

Ever since the economic virus called “negative interest rates” scattered over European and later Japanese banks, our economic system has been the most unstable since the financial crisis of 2008. The virus, negative interest rates, is a concept in which the central bank charges interest in borrowing money and holding an account. It was brought forth in efforts to increase economic growth by giving commercial banks a tax on the large amount of reserves they hold in the bank. In other words, commercial banks’ negative charge results in the commercial banks having to pay to keep their money at the central bank.

Recent economic troubles has made for a very troubling job market, this and other factors have caused many Americans to abandon their search for employment. As a result public assistance programs have seen the largest amount of growth among social programs. These programs have had success in alleviating poverty among the elderly. They have not been as successful in helping child poverty and a downright failure in helping the working poor (Pedace, 2004).