The Issue Of The Subprime Mortgage Crisis

1004 Words Dec 3rd, 2016 5 Pages
Background:
The Subprime Mortgage Crisis or so called “United Housing Bubble” is considered as the most serious recession after 1929. The crisis involved not only one or couple companies but the whole U.S. Financial and Real Estate industry. Furthermore, the crisis lead to millions of people in US lost their houses, or homes and several industry giants failed down like Lehman Brothers, American International Group, and Merrill Lynch and so on. The effect of the crisis influenced not only America but also the economics of the whole world in the next few years.

A very direct and well-known background of the crisis is the relatively high default rate in the subprime housing mortgage sector as well as known as the main reason of the crisis. On the other side, the background of the crisis in terms of political side can be traced back to 30 years ago as the acceleration of the implementation of new liberal economic policies. The new liberal policy is an idea which lessen the regulation of the financial and labor market by the government of U.S. It also encourages to promote consumption in order to drive high economic growth.

2).
Despite the derivative tools that have been abused used which derived the crisis . A very important underlying reason of the crisis is that the government wanted a higher economic growth and less restrictions of financial industry. Based on the assumption, from the Appendix __, we can see that the housing price in the US were constantly increasing.…
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