What Brought on the Financial Crisis of 2008

Several developing countries are sunk in debt and poverty because of the arrangements of global establishments, for example, the International Monetary Fund (IMF) and the World Bank. Their projects have been vigorously reprimanded for a long time and have been constantly blamed for poverty. Moreover, developing countries have been in constant expanded reliance on the wealthier countries, despite the IMF and World Bank's claim that their main goal is to fight poverty (Shah, 2013). During recent decades, the poorest nations on the planet have needed to swing progressively to the World Bank and IMF for money related help, because their impoverishment has made it unthinkable for them to acquire somewhere else. The World Bank and IMF connect strict

The main cause of the Crash of 2008 was deregulation in 1980s of Financial Institutions which include Banks, Insurance Companies, Credit Rating Agencies etc. As a result of this deregulation, the Financial Institutions started playing in their own ways to get maximum personnel benefits. By the time the crisis was over, the top five executives of Lehman Brothers made millions of dollars between 2001 to 2007, the AIG’s Financial Product Division lost 11 billion dollars, instead of being fired, and Joseph Cassano, the head of AIGFP, was kept on as a consultant for a million dollars a month. The use of derivatives, subprime loans, and much greed within Wall street were all factors that caused the economy to drastically drop in the first place; making mortgage-backed securities in danger of defaulting. Brooksley Born was one of many that attempted to regulate derivatives; unfortunately she did not succeed. To pay for troubled assets from financial institutions, the Senate passed the $700 billion bailout bill that came out of taxpayers. Additionally President Obama came up with an economic plan that enforced regulation to speed up recovery. Although, I believe “command and control” was the wrong path to take.

After the Lehman Brothers’ investment bank failed, the stock market began to drop, and successful companies laid off a lot of the employees, therefore recession in America happened: This was the financial crisis of 2008. Two hypothetical solutions that could have cured this crisis are the creation of more pet banks, and the demolishing of Fannie Mae and Freddie Mac. With the creation of more pet banks, the local taxes would be less than if the government was taxing the people. And since so many people were left unemployed, a lot of people would be unable to pay their taxes. Therefore, with the smaller local state banks, people would not have to worry about paying the Federal Government. Additionally, having a larger supply of pet banks could result in the reinstalling of more employment opportunities for the unemployed workers. Moreover, less people would be unemployed, and people would be able to pay their taxes not only to local banks, but also to the Federal Government.

The year 2008 was a horrendous year for most, in terms of money. The housing bubble deflated and the steep drop in prices sent both institutional investors and average investors into financial turmoil. There is quite a bit of controversy as what actually caused the housing bubble, but in this essay we will be using the explanation given by John C. Coffee Jr. Here he identified various factors that worked in tandem to subsequently cause the financial crisis of 2008. The first was the systematic failure by what he termed a “gatekeeper.” Which he later defines as financial institutions that provides verification for investors. In this instance the gatekeeper was the credit agencies who failed to appraise the actual value of the mortgaged backed

From 2000 to 2015, college graduate salary increases year after year, but there are ups and downs in the process of rising. There are many factors of these ups and downs, such as economy, policy, social development and so on. For example, in 2008 the US financial crisis directly affected many industries, and led to a larger employment shock, which led to the decline in wages. And then because of the subprime mortgage crisis in the United States caused by international financial tsunami, leading to many of the world's financial institutions in the chain of bankruptcy, and triggered a lot of the financial industry has been layoffs wave. The financial crisis of 2008 has infiltrated a lot of real economic fields, and brought great negative impact

Around the world the effects of the crisis due to globalization are evident and the implications of globalization can be seen with much more clarity as many major financial institutions abroad also invested in mortgage securities and collateralized debt obligations. This like in the us lead to bank failures and bailouts in order to stabilize the markets that had been badly damaged by the financial crisis. Despite the efforts to stabilize the markets the damage to the economies of the world had been done and efforts of governments and central banks to stimulate their economies were

As evolution proceeds through time, it carries the gift of facilitation and intelligence. However, in today’s intellectually advanced society there has been a cloud of egotism that has decimated mortality and integrity amongst individuals in an unpredictable economy. The financial crisis that took place from 2007-2009 was based on the lack of moral judgment and a surplus of gluttony that affected the united states economy drastically. This crisis is primarily based on the negligence of banks by granting loan opportunities to individuals who do not qualify due to bad credit score, lack of assets to make a down payment, employment status. However, numerous banks had predicted and were aware that most of the individuals who applied for a loan and did not qualify would default on their mortgage, which would allow banks to repossess the house and sell it for maximum value.

As the financial system moved forward after the S&L Crisis, what later became known as the parallel banking system began to bloom. In this system, commercial banks began to act like large investment banks and quickly the financial system as a whole became much larger, more complex and much more active in securitization. Some industry analysts say that it was advances in data processing and telecommunication that created economies of scale and scope in finance, and fostered the need for larger and more diversified financial institutions. As these banks became larger and much more powerful, they pressured regulators to strip away all barriers to competition and growth. This began to take hold with the Riegle-Neal Interstate Banking and Branching Efficiency Act in 1994 (RNIBBEA). This allowed bank holding companies to practice nationwide branching and acquire companies in other states. This led to mass consolidation that resulted in the top ten commercial and investment banks owning a combined 10.8 trillion dollars by 2007, and a 25% increase in all industry assets.

The credit crunch, which occurred in the U.S. housing market between 2007 and 2009, led to the biggest global financial crisis. The impact of this crisis extended over the world, and the economies of many countries were damaged. Kawai stated that: ‘The ongoing global crisis has had a profound impact on the Asia and Pacific region, particularly on its exports.’ (2009:1)

The global financial crisis of 2007 - 2009 was a destructive phenomenon, which adversely affected development of the international financial system in during globalization. This crisis has acquired a global status, as it started in one country (USA), gradually spreading to other countries, regions, continents and eventually all the world space. According to Bloomberg, the financial crisis in 2007 – 2009 caused damage to banks shareholders worth more than 690 billion US dollars. In contrast, the total losses in the banking sector worldwide during the crisis in the early 1990s amounted to 200 billion US dollars. The 2007-09 crisis is characterized by a decline in total value of national wealth of the world: from 107 trillion to 50 trillion US dollars.

When we open the economy to international transactions we have to take into account the effects of trade in goods and services (i.e. items in the current account) as well as trade in assets (i.e. items in the capital account). Opening the economy to international trade in goods and services means that we have to take into account the increased demand for our goods by foreigners (our exports), as well as the decreased demand for our goods that occurs because we purchase foreign goods (i.e. our imports). Total expenditures in an open economy are C + I + G + NX, where NX -- net exports -- is equal to the level of exports (X) less the level of imports (V). Thus, our exports (X) represent

A positive current record adjust demonstrates that the country is a net moneylender to whatever is left of the world, while a negative current record adjusts shows that it is a net borrower from whatever is left of the world. A present record surplus builds a country's net remote resources by the measure of the overflow, and a present record shortfall diminishes it by that sum. A nation's adjust of current account is the net or distinction between the nation's exports of products and enterprises and its imports of merchandise and ventures, disregarding all money related current accounts, speculations, and different segments, over a given timeframe. A nation is said to have a current account surplus if its export surpass its imports and a current account deficit if its imports surpass its current account. Positive net deals abroad, by and large, adds to a present record overflow; negative net deals abroad, for the most part, adds to a present record

The three major international economic institutions are the International Monetary Fund (IMF), the World Bank and the World Trade Organization; this book mainly focuses on the IMF and the World Bank, due to the author’s first-hand experience with both institutions. The IMF, a public institution built as a guiding hand for economic stability around the world, has brought false

Another reason behind the 1997 Asian financial crisis was the large current account deficits. Asian leaders agreed that large current account deficits could not be good, but they made the logical economic argument that if a current account deficit mostly reflects higher investment, it would eventually increase an economy’s competitiveness and therefore its ability to repay the debt, and would certainly be more sustainable than a deficit driven by

The balance of payments account indicates a systematic record of all export incomes and import payments of a country during any year. Any import from abroad has to be paid for. On the other hand, any export will bring money flow into the country. If we subtract the total value of the imported commodities from the total value of the exported commodities of a country, what we obtain is called the ‘Balance of Trade’ of the country. If the difference is positive, i.e. if the value of commodity exports exceeds the value of commodity imports, we say that the balance of trade is favourable. If the difference is negative, we say that the balance of trade is unfavourable.