The Term Global Financial Crisis (Gfc) Refers To The Financial

Better Essays

The term Global Financial Crisis (GFC) refers to the financial crisis of 2008-2009 that, according to leading economists, is the worst financial crisis since the Great Depression (Eigner, 2015). The crisis began in 2007 due to a mortgage market failure in the United States and in the following year, with the collapse of the Lehman Brothers investment bank, advanced into an international banking crisis, which then developed into a global economic crisis, The Great Recession (Williams, 2010). This essay will conclude that that due to private sector financial management, government regulations and legislation and deregulation were at the root cause of the crisis and give explanations surrounding this criteria. To gain a detailed understanding …show more content…

(Woods, 2009) This played a large role within financial institutions leading up to the crisis (Arner, 2009.) The cause of the crisis not only reflects the private sector but that of the government (Kling, 2009.)

Economists believe that some of the most important financial mechanisms associated and attributed to the crisis were due to legislation and regulatory anomalies (Kling, 2009). Kling writes that one of the most notable of these concerns the requirements of capital hill that favour securities backed by risky mortgages rather than ordinary direct mortgage lending. Kling also states that the emergence of a large quantity of mortgage loans that host low down payments due to the formation of housing equity also heavily impacted overall on the crisis (Kling, 2009.) Economist Lawrence H. White bolsters these assertions by associating the financial collapse with the same political-backed efforts to extend mortgage lending to buyers who could not meet the aforementioned standard mortgage lending (Yandle, 2010.) It is important to not only analyse these regulatory efforts in the few years leading up

Get Access