Essay On Financial Crisis Of 2008 Analysis

Essay on Financial Crisis of 2008 Analysis
In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled throughout Europe and Asia. Many economists
consider it the worst crisis since the Great Depression, and its alarming results are still seen today, a long six years later. Truly, the recession's
daunting size and formidable wake have left no one untouched and can only beg the question: could it have been prevented? The causes are manifold,
but can be found substantially rooted in illogical investments and greedy schemes. Before any of the risky moneymaking endeavors, investors
traditionally would have gone to the US Federal Reserve to buy treasury bills, a safe and profitable investment. Later, when interest rates were lowered
to only 1% in... Show more content on Helpwriting.net ...
The banks then created a new idea–linking investors to homeowners through mortgages. Ordinarily, a mortgage broker would connect a house–buying
family to a mortgage lender, who would then supply them with a mortgage. In this system, everyone is happy–the mortgage broker earns a handsome
commission, the mortgage lender earns a new mortgage, and the family is now a homeowner in a market of increasing housing prices.
In the new system, an investment banker buys the mortgage from the lender, borrowing millions of dollars to buy thousands of mortgages, and every
month he gets payments from homeowners for each of the mortgages. The banker then consolidates all the mortgages and splits the final product into
three sections: safe, okay, and risky mortgages, which make up a collateralized debt obligation (CDO). As homeowners pay their mortgages, money
flows into each of the sections, with the safe filling first and the risky filling last, contributing to their respective names. Credit agencies stamp the top
two safer mortgages with a triple A or triple B rating, which are then be sold to investors who want a safe mortgage, while the risky slice is sold to
hedge funds who want a risky investment. The bankers make millions, pay back their loans, and investors also make a worthwhile investment. So
pleased are the investors, however, that they want more. Unfortunately, back at the beginning of the cycle, the mortgage broker can no longer find
qualified mortgagers
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Inside Job Is A Documentary That Covers The 2008 Financial...
Inside Job is a documentary that covers the 2008 financial crisis. The first part of the documentary focuses on what led to the financial meltdown. In
the 1980 's the finance industry exploded after investment banks went public, leading these firms to have an excess of stockholder 's money. Then the
president at the time, Ronald Reagan, began a 30 year period of financial deregulation. Reagan deregulated savings and loan companies which allowed
them to make risky investments with depositor 's money, which led to taxpayers paying $124 billion dollars when they inevitably failed. Executives in
these companies were also stealing money from their depositors. Another problem was that many of the executives from these investment banks ended
up being put into powerful positions in the government where they pushed for even more deregulation. In the late 90 's the internet bubble burst after
investment banks knowingly promoted internet companies they knew would fail. A financial innovation known as derivatives became a $50 trillion
business yet they were completely unregulated. When there was an attempt to regulate this market, it was almost immediately shut down and a law was
put in place banning all regulation of derivatives. Under these new rules it created a new securitization food chain. Investment banks were creating
complex derivatives called collateralized debt obligation and selling these debts to investors. Then these CDO 's were rated by rating agencies, with
most of them

Economy And Its Impact On The Economy Essay
Sometime in late 1950's Minsky started warning about the gradual shift of the economy from a very robust financial system that was stable and with
no financial crisis in the early postwar period. He had called with his analysis that gradually over time debts in the private sector would tend to build
up and increasingly risky financial innovations would increase over time. He is very famous for the statement that stability itself is destabilizing.
Although things seem very stable today, gradually over time that stability would build confidence in individuals to take increasingly risky positions in
assets. The model that he had built explains financial crisis in the economic system. He brings up that supply of credit increases during boom and
abruptly decreased during economic slowdown. It seems almost intuitive that from a standpoint of an investor the great time to invest is when
economy is booming to increase his or her profitability. Lenders as the investors become increasingly optimistic about their return and they both
become less sensitive to risk. But when the economy starts slowing down investors sell out their holding to not to lose more of their assets making the
economy even more worse off. All of the New Deal structure that have been put in place in the economy during the great depression, drove tremendous
buildup of government debt in World War II and gave a very safe asset for the private sector. This would be in a sense leverage, safe government debt

Effects Of The Financial Crisis Of Deutsche Bank 's...
7.Effects of the financial crisis Deutsche bank's involvement with collateralized debt obligations and residential mortgage–backed securities
contributed greatly to the housing bubble that burst in 2008 thus helping launch the great recession. Even though the residential mortgage–backed
securities were only trading in the United States our local economy here is extremely influential all over the world because of globalization, and the
interrelations of the world's economy. The recession created here by the housing bubble bursting helped to create a global recession. 8.Regulation Most
financial institutions do not hold themselves accountable. However, they do fall under the regulation of governing bodies. In the United States we
have the US securities and exchange commission (SEC) that regulates trading of commodities and securities that are exchanged on an open market. In
April 2010 the SEC proposed revisions to the application of asset–backed securities (CDO and RMBS). A few of the most important implementations
are that the issuer is required to file on the SEC website a computer program that provides investors "with a tool to analyze information about specific
loans within the pool of assets. This computer program would show the effect of the so–called "waterfall" so investors can analyze how the borrowers'
loan payments are distributed to investors in the ABS, how losses or lack of payment on those loans will be divided among the investors, and when
administrative

Government Intervention And Laissez Faire Of Market...
As evidenced by the plethora of explanations concerning it, the 2007–08 financial crisis that originated in the United–States is highly complex. The
literature presents various causes, most of which can be placed on either side of a debate between government intervention and laissez–faire of market
mechanisms. On one side, it is argued that financial actors are responsible for the crisis as a result of their use and distribution of complex and risky
financial products, and their irresponsible lending. On the other side, the arguments centre on policy failures, or unintended consequences of
government initiatives, as interventions into economic mechanisms. Some explanations see both financial markets and policy at the origin of the
crisis, and some elements are common to all of these interpretations. Through these varying explanations, we may find certain facts about the time
leading up to the crisis, explaining its nature and steps.The three main ingredients of the crisis were the following: a housing bubble, the securitization
of mortgages – or Mortgage–Backed Securities (MBSs) – and a credit expansion to leverage financial gains. In its most simple characteristics, the
housing bubble was a long–term trend in US housing markets for loans below the quality standard. More precisely, people were buying houses with
loans that they had a low chance of repaying, especially considering the unpredictability of markets. After the issuing of these loans, the mortgages as
financial

Managing The Global Financial System
In today's financial world systems, methods have been developing exponentially that reduce risk and increase the profits of investors who are
financially able and willing to commit funds to investments, becoming part of the global financial system. The methods are sophisticated and require
financial experts who are entrusted to make the right choices in arranging the best investment plans that will benefit these investors. One of these
increasingly popular methods is asset securitization. Measures in the application of this particular method have been improving, especially since the
market crash of 2008. Structured finance, which is another word for securitization, is an alternative, non–standard way of raising money by creating ...
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For example, in the United States, farm railroad mortgage bonds were some of the earliest forms of securities. Later, in 1970, the U.S. Department of
Housing and Urban Development created the first modern residential mortgage–backed security, creating the Government National Mortgage
Association (GNMA or Ginnie Mae). Some years later, the model developed in securitization of mortgage–backed loans was also applied to
non–mortgage assets such as automobile loans and credit card sales by banks. In the 1990s, the life insurance and reinsurance (catastrophe coverage)
markets began using securitization. Securitization in in the reinsurance markets played an important role after Hurricane Katrina.
As mentioned before, there are certain steps which take advantage of this method of financial structure. First, if there is a company that wants to obtain
financing through securitization, that company will start by identifying assets that can be used to raise funds. These assets typically represent rights to
payments at future dates and are usually referred to as "receivables." The company that owns the receivable is usually called the "originator." In this
process, the risk that these payments many not be made on time is an important factor in valuing the receivables. In this factor, emphasis and
confidence is place on the originator, who must reasonably predict the

Lehman Lynch's The Federal National Mortgage Association
1st April 2008, Bear Stearns is acquired by JP Morgan Chase. September 7th 2008 the Federal National Mortgage Association, "Fannie Mae" and the
Federal Home Loan Mortgage Corporation, "Freddie Mac" are acquired by the United States Federal Housing Finance Agency. September 14th 2008,
Merrill Lynch is acquired by Bank of America. September 16th 2008, American International Group is acquired by the United States Federal
Government. September 17th 2008, Lehman Brothers is acquired by Barclays. September 26th 2008, Washington Mutual is acquired by JP Morgan
Chase. In a period of six months, seven of the most dominant financial institutions in the country crashed. Seven Goliaths were downed by stone shots
right to the sweet spot but there were no Davids in this story, these were all self–inflicted wounds. Deep wounds that affected the nation as a whole,
wounds that cut so deep that they crushed the American Dream for some with each passing day. In this essay I aim to address the decisions that led to
the demise of these behemoths and the worst economic downturn since the infamous Great Depression of the early 20th century.
The 1930s, the period of the Great Depression is perhaps the most unstable financial time in United States history. The decade where more than 40
percent of nation's banks disappeared crippled the economy for years and caused the Senate to pass the Glass–Steagall Act (part of the U.S. Banking
Act of 1933). The main purpose of the legislation was to separate

A Deeper Look At The Future Of Work
Taking a deeper look at the future of work has never been so critical in today's society. Not only does one have to assess the working conditions
within their own country but rather countries around the world because ultimately, we are one intertwined and whatever happens to one country will
affect us in some way. Trying to discover what the future of work has in store for us is integral because as history indicates, being ignorant of the
economy and its people can lead to disastrous events. The first of these events being the Great Depression of the 1930s and the most recent one being
the stock market crash of 2008. These events occurred because nobody paid attention to the people running the economy and this led to sharp
increases in shares and mortgages (in the years leading to 2008). This affected some businessmen but more importantly, the working class people.
Currently, we are doing a relatively better job at monitoring the economy and market. We have even increased overall wealth in our nation wide,
however a majority of that wealth has gone to the individuals who already have money but at the expense of the lower classes. Therein lies the
problem when looking at the future of work, especially in a capitalist society like Canada. How do we solve this increasing gap between the rich and
poor? This question has been the topic of debate for the past couple of years. Every now and then, society tries to take a look at this issue in the form
of films Though they do not

Analysis Of Inside Job And The Big Short Story
The assumed response to this is for the audience to really pay attention to what these celebrities are saying throughout the movie, as it is crucial to
grasp an understanding for this type of financial terminology, as it leads the story. While both texts display a distinct stylistic approach, it is evident
that Inside Job and The Big Short show similar ideas and perspectives regarding the causes and impacts of the global financial crisis.
Both directors for each text apply similar narration techniques between the two, however, the context itself is portrayed in a distinct way. Seeing that
The Big Short is classified as a nonfictional film, it is not considered to be a typical feature long film, instead, it features similar ideas in terms ... Show
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Here's world famous chef, Anthony Bourdain to explain." (The Big Short, 2015). This is then followed by a high–profile celebrity, Anthony Bourdain
to explain Collateralized Debt Obligations, as Gosling highlighted it is important to understand. Nonetheless, this breaking the fourth wall aspect in a
sense can be viewed as a documentary, similar to Inside Job, however, McKay uses a unique style of portraying The Big Short in a quirky and
comedic way, instead of the regular stylistic approach that is seen in Inside Job. Contrastingly, Inside Job consisted of one narrator, Matt Damon. This
text follows the traditional style of storytelling through voice–over narration. What is significantly different from narration in The Big Short, is that in
Inside Job, the narrator informs the audience in such a formal way, they're almost expected to understand all the financial terminology described in this
text, such as CDO (Collateralized Debt Obligation), Credit Default Swaps and 'AAA' rating. Moreover, everything Matt Damon states throughout the
documentary is accompanied and backed up by multiple clips of footage which are overlaid. For instance, when the narrator discusses that
unemployment levels in Iceland are tripling in just under six months, the camera executes numerous quick long shots of dormant buildings and work
sites. Furthermore, as narration

The Birth Of Structured Products
The birth of structured products:
Structured products were introduced in the mid–1980s. At that time the economy was characterized by high interest rates and volatility, therefore there
was a growing demand for instruments that could hedge against one or more risks and that could give to the greediest investors exposure to markets
that they could not enter into by themselves.
Because of the recent history and wide variety of structured products, no standard definition exists. In general they are defined as "financial instruments
with cash flows that depend on the value or performance of underlying assets or embedded derivatives" (Bennett, 2013, p.19). Their three main
characteristics are:
They derive their rating from the quality of the collateral;
Their credit rating is enhanced with respect to the underlying assets thanks to their prioritization scheme of claims;
They are sold through a separate legal entity. (Fabozzi, Lancaster, Schultz, 2008)
Therefore securitization is the process by which illiquid assets (such as a pool of loans) are transformed into liquid instruments to be sold on capital
markets (debt securities).
The securitization process:
To issue a structured product, a financial institution first collects a large number of assets, usually credit sensitive, and assembles them in a portfolio,
outsourced to a Special Purpose Vehicle (SPV). The aim of this outsourcing is the isolation of the institution's balance sheet from potential liabilities and

Is Bespoke Tranche Opportunity?
At the end of one of the best drama movies, or movies in general, The Big Short, the producers made a shocking cite: "Bespoke Tranche
Opportunity, which, according to Bloomberg, is just another name for CDO." (Carlozo) The name CDO is like a frightening alarm that goes off
when everyone who understands it sees it on screen in movie theaters. Only less than a decade ago, the American housing and banking market
completely collapsed because of fraud and greed of major banks and rating agencies. People at Wall Street were arrogant and made the market
unintelligible to average persons. The outcome? I think that was a time we will never forget. Bespoke Tranche Opportunity is indeed fairly similar to
CDOs, and is indeed likely to cause the market to completely collapse, but we might be able prevent this with careful regulations.
Bespoke Tranche Opportunities are, in lots of ways, similar to collateralized debt obligations. Just like CDOs, bespoke tranche opportunities utilize
mortgage–based securities to yield high returns. According to Steven Mintz, banks took mortgage loans that were made based on shaky credit and
pooled them into a basket of mortgage securities that were backed by homes. They then sell those CDOs to investors through credit default swaps. A
CDS is a agreement that the seller will compensate the buyer in the event of a loan default. When homeowners failed to pay their mortgage loans, they
default their loans. Investors are required to pay premium fees to sellers.

Fair Value Hierarchy
Memorandum to: Accounting department of family finance co. from: Daisy subject: fair value hierarchy date: december 15, 2012
Introduction
Family Finance Co. (FFC), a publicly traded commercial bank, invests in a variety of securities in order to enhance returns greater than interest paid on
bank deposits and other liabilities. The primary investments of FFC are collateralized debt obligation, mortgage–backed securities, auction–rate
securities, equity securities in nonpublic companies, interest rate swaps, and a fuel swap for gasoline. FFC measures the derivative at fair value,
presenting the portion of the fair value change by using the fair value hierarchy. This memo will present the appropriate classification in the fair value ...
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Also, as of the measurement date, there is lack of recent and relevant transactions. Thus, the fair value measurement of this CDO should be classified as
Level 3. By analyzing the market changes, FFC determined that the CDO's market was not active and there has been a significant decrease in the
volume and level of activity. FFC used an income approach valuation technique which is present value technique to make measurement. Because this
approach can maximize the use of relevant observable inputs and minimizes the use of unobservable inputs to reflect the fair value more
representatively.
Instrument 2 –Mortgage–Backed Security The fair value measurement of the Mortgage–Backed Security investment shall be categorized within Level 2
of the fair value hierarchy. According to ASC 820–10–35–52, "Level 2 inputs include the following: a. Quoted prices for similar assets or liabilities in
active markets". These inputs included quoted prices in active markets for similar MBSs with insignificant adjustments for differences between the
MBS held by FFC and similar securities. In Q4 of 2012, the prices for transactions didn't reduce the relevant to the fair value measurement. Therefore,
the fair value measurement of this MBS should be classified into Level 2 of fair value hierarchy. The market of Mortgage–Backed Security

The Financial Crisis Of 2007 Essay
Seven billion people affected. How can a single screw up lead to a mess that not even governments can fix? How can something so severe continue
to damage countries financially 5 years after it began? Many people didn't see it coming. But what's worse is that the people that did see it coming,
contributed to it. Yes. They fueled this mess. And now we can't get out of it. This is the financial crisis of 2007 . Let's dig in to where it all began. The
subprime mortgage crisis was a result of mortgage brokers selling mortgage products to people with terrible credit, no down payments for the house, no
stable income into the home, and basically no nothing instead of selling it to responsible people who they knew would not default on their mortgage.
(Let's call the reliable homeowners prime and the unreliable ones sub–prime for times sake). They would give out home mortgages to everyone
knowing that they wouldn't be responsible for the mortgage that they give out, but that they would be able to sell them to investment bankers, who
would then sell them to investors, hedge funds, etc or at least be left with a house as housing prices always rise. But let's start from the beginning of
how this whole mess started. So Wall St. hatched an idea to connect investors to home owners through mortgages. A family decides that they want to
purchase a house so they save up for a down payment and then contact a mortgage broker who connects them to a mortgage lender who sells them a
mortgage. The

The Pros And Cons Of Securitization
Structured asset securitization is the process through which various types of non–liquid assets such as residential mortgages, account receivables, auto
loans and credit card debt obligations are sold to a special purpose vehicle ("SPV"), which uses the pool of assets as collateral for the issuance of
securities to investors (Fabozzi, 2013). During an asset securitization issue, one of the central elements is that repayment depends primarily on the
principal and interest cash flows from SPV's underlying assets, and not on the overall financial strength of the parent company or originator (Fabozzi,
2013; Riachi & Schwienbacher, 2015; Vink & Thibeault 2007). According to Vink & Thibeault (2007), securitization issues can be distinguished based
on their ... Show more content on Helpwriting.net ...
By achieving "bankruptcy remoteness", firms commit to more efficient investment decisions in bankruptcy (Ayotte & Gaon, 2010). In addition, this
practice together with other credit enhancement mechanisms, generally allow the new securities issued to obtain higher ratings from credit agencies –
including risk free levels. A number of studies have concluded that securitization has various positive implications. For instance, some empirical studies
show that securitization creates value by increasing liquidity, reducing credit and improving leverage ratios (Amrose, Lacour–Little, & Sanders, 2005).
According to Riddiough (2011), and it can alleviate market failure, and increase competition and borrower choice. In their study, Altunbas et al (2009)
show how banks' capacity to supply new loans has been strengthened by the securitization activity. In addition, another advantage of securing assets is
that funding costs can be reduced because the securities issued can match better the risk return preferences of investors (Aiyar et al,

Global Financial Crisis Essay
The Global Financial Crisis that occurred in 2008 and crippled every major economy was not an accident; it was caused by an unregulated and
uncontrolled financial industry. Decline of Real Estate Value The financial crisis is considered to have its roots in the United States where there was
an increase in loan losses for subprimes. Banks were lending money to people that did not have the capability to maintain a regular repayment schedule.
Homeowners only had the ability to pay the interest on their mortgage and never pay the actual principle amount. When the interest rate began to
increase, homeowners could no longer afford the interest payments required. Housing prices began to fall and debtors found that they could no longer
afford... Show more content on Helpwriting.net ...
The biggest issue since the Great Depression was to continue regulating the financial sector to avoid the same crisis that the United State had just
suffered. However, for regulations to be implemented effectively, it was crucial that it was well designed; even then there was a possibility that it
might not work. Greed and vested interest are likely to hijack the politics of regulation design. In the 1980's the financial industry exploded. Investment
banks went public giving them the ability to get additional funds from stakeholders to spend. Investing companies began to become richer and more
powerful than ever before. When Ronald Reagan became President of the United States, a 30–year financial deregulation began with the support of
economists and financial lobbyists. The Regan administration began to deregulate savings and loan companies, allowing them to make riskier
investments with depositors' money . Hundreds of saving and loan companies failed in their investments and in the end of the decade declared
bankruptcy. The memories from the earlier great Depression began to diminish and the government stated that the marketplace must be set free. This
led to the precautionary rules to be scrapped. Together with looser lending standards for other kinds of consumer credit, this led to a radical change in
American behavior. A New Era After the major failure of many savings and loans

The Effects Of Global Finance Crisis On Brazil's Economy
The Effects of Global Finance Crisis 2008–2009 on Brazil's Economy
While researching written articles about the effects of global finance crisis 2008–2009 on Brazil's economy, I found numerous financial researchers
that had published documentations in reference to the impact on the Brazil economy. In addition, the banks and government interactions to the global
finance crisis 2008–2009, particularly research papers, financial journals, newspapers, pamphlets, and brochures. The Brazil government policies deal
with a less openness, and its emerging economy enabled the country finance regulators the ability to initiate moderate banking countering measures to
the crisis. These actions taken by the Brazilian government minimized the long term impacts of the global finance crisis 2008–2009 compared to more
developed nations. My goals in this paper, is to explore the Brazil banking finance reactions, and government regulation policies that led to mitigating
the impact of the global financial crisis of 2008–2009.
To achieve this goal, I analyzed the Brazil banking sector response to the global financial crisis effect due to the tightening of credit and higher
exchange rate. Next, I researched the impacts on the Brazilian economy affecting its imports and exports. Thirdly, impacts on the Brazil's currency, and
lastly a conclusion on the actions and impacts of the Brazil response to the financial crisis. I also include an appendix after the Works Cited that
contains images of the

Financial Crisis Essay
Marconi (2010) believes that the role played by the institutional investors propagated the financial crises. Institutional investors, which is both,
individual or companies do enjoy the benefits of reduced commission preferential regulations. This is due to their large and professional investments.
Institutional investors like the mutual funds, pension funds, hedge funds like Magnetar Capital, and Life insurance companies like the AIG and
investments trusts contributed to the global financial crises of 2007–2008. This financial crisis also referred to as the great recession was triggered by
liquidity problems in the United States economy. Many large financial institutions collapsed according to Geczy (2010). The government had to bail out
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There were breaches in accounting practices and general breach of business ethics. The bank directors and the chairman are accused of having
certified false financial statements and not disclosing key financial practices in the bank. Among the undisclosed practices was the Repo 105. The
Lehman had been using it from 2001, it involved using the Repos to finance assets and treating them as sold Repos while accounting. This according
to the report was abuse of ordinary repurchase agreements, it was done to lower the banks leverage as was asked of investment banks toward the end
of 2007. The bank at times even involved its subsidiaries. Financial leverage should have been attained by borrowing and investing the same at higher
interest rates. The auditors Ernst &Young have been accused of professional negligence for failing to disclose these practices thus misled the investors
on the financial status of the bank. Some critics cite the complex financial systems and financial investment products to have been the trigger of the
2007–2008 financial crises. According to Laurence (2010), other factors include: failure of effective regulations in the investment markets,
inappropriate credit interests, and self interest practices among the institutional investors. According to Hughes (2011), some critics also argue that the
institutional investors were behaving in irrational manner

The World 's Leading Industrial Countries
This paper will discuss the comparisons between the Group of seven (G7) countries known as the world's leading industrial countries and their
economic performance since the financial crisis using the IS – LM model.
Representatives of the European Union , that includes the presidency of the European Union and the European Central Bank , as well as leaders of
international financial institutions and regularly attend. In the year 2013 the United Kingdom assumed the presidency of the Group of 7 will host a
meeting of finance ministers and central bank governors on Friday May 10 and Saturday , 11th G7 finance ministers make and central bank governors
from seven countries : Canada, France , Germany, Italy , Japan, Great Britain and the United States. The group met regularly since 1976 to discuss key
issues related to global economic stability.
The G20 conferences included national leaders for the first time in 2008 amid the world financial crisis and recession, and in 2009 G20 leaders
announced plans for the G20 to replace its predecessors as the main forum for global economic policy, reflecting the increased economic importance of
China and other emerging–market nations.
Emerging nations had long complained that their interests were not addressed during the G7 meetings; these concerns resulted in the first meeting of
the newly formed Group of Twenty, with theG8 nations plus Argentina, Australia, Brazil, China, the European Union, India, Indonesia, Mexico, Saudi
Arabia, South

CDO Rating
Another reason nobody believed Michael Burry and Steve Eisman was because of the fraudulent economic activity taking place in the rating
agencies. The biggest criminal act performed by the rating agencies was misjudgements in their ratings of CDOs or collateralized debt obligations
(Weisberg). The CDOs were structured obligations, with several tranches of differing risk characteristics. The senior tranche had first claim on the
mortgage interest and principal paid by the subprime mortgages in the mortgage pool backing each CDO issue (Poole). However, CDOs now are
being used to take a bunch of BBB and BB loans that didn't sell and repackaging them and turning it into a whole other mortgage bond at 95% AAA
rated by the rating agencies. This is ... Show more content on Helpwriting.net ...
However, that is not all that the rating agencies did to destroy the system. The rating agencies also did not distinguish between thick–file FICO scores
and thin–file FICO scores (Lewis). A thin–file FICO score, is a score of an investor that had not done much borrowing (Lewis). The file was thin
because the borrower hadn't done much borrowing. For example, immigrants who had never failed to repay a debt, because they had never been giving
a loan, often had surprisingly high thin–file FICO scores (Lewis). These people who had high thin–file FICO scores became more useful to the banks
from a credit rigging point of view, but the initial mistake came by the rating agencies who failed to identify this problem and fix it. Since these people
have high FICO scores, then when put through Moody's model helps the banks get the money to lend to poor thin–file FICO score people who need the
money to buy a house

La Salle University : The Volcker Rule Case Study
La Salle University
The Volcker Rule Case Study
Henri Popa and Christian Giambuzzi
FIN 306–01 Financial Services Industry
Dr. Elizabeth W. Cooper
February 20th 2015
The Glass–Steagall Act was a law enacted right after the stock market crash of 1929, whose intent was to split commercial and investment banking
activities into two different entities. The main objective of the act was to prevent future crises and bank runs. The provision of the act disallowed
commercial banks to deal with underwriting and/or dealing in securities, and to have a cap in place on the amount of debt securities being purchased
by the bank, after it was approved by the regulatory agencies at the time. The act also stipulated that investment ... Show more content on
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Regulators over time feared that this act would undermine the role and competiveness of the commercial banks in the financial system. Non–banks,
such as General Motors and Sears began offering consumer credit through their finance companies, creating competition with commercial banks for
consumer loans. With regulation Q in place, interest paid on savings and other deposit accounts where capped, and when the rate of inflation rose pass
the maximum allowed yield on the accounts, consumers pulled their money out of the banks in favor of finance companies, government and AAA
corporate bonds, that paid a higher yield and were also safe. This was the final straw that broke the camel's back, the Glass–Steagall Act was repealed,
and the Gramm, Leach, Bliley Act of 1999 was passed. The financial crisis of 2007–2009 can be attributed to many reasons: the Community
Reinvestment Act, the creations and securitization of subprime mortgage loans, and the buying and selling of these securitized loans by banks. The
Community Reinvestment Act was designed to "encourage" depository institutions of lending to all segments of individuals, predominantly those in
low to moderate–income levels, preventing "redlining." As a result of this act, subprime mortgages where created. The subprime mortgages were issued
with variable interest rates, permitting borrowers to make payments only towards the interest and not their principal payment. As the rate of

The American International Group : A Leading International...
The American International Group "is a leading international insurance organization serving customers in more than 100 countries." When this
organization crashed in September 2008 it saved by the skin of its teeth by the Federal Reserve which owned by the government proved a bailout for
The American International Group. This bailout caused The American International Group to become one of the most debated player in the finical
crises of 2008–2009. The American International Group is run by a group of individuals who only were looking out for themselves and solely
because of this the company eventually met its downfall, however it would soon rise again in the near future. The company is a company involved "in
a high–stakes risk–taking scheme" this is supported by managers and employees of AIG. The company had around 116,000 employees, about 500
employees per unit. However what brought the company down was its Financial Products unit this unit solely specializes in products, "and other
financial contracts that were tied to subprime mortgages" or merchandises. This unit had generated billions, and billions of profit for The American
International Group, however its dealings were risky and possibly illegal. The former CEO Maurice "Hank" Greenberg of The American International
Group had suspected that the Financial Products unit were involved in some risky possibly illegal activity, this was brought to surface after Liddy had
admitted this to former Treasury Secretary Hank

Great Recession Essay
During the late 2000s, United States took a dire turn towards failure, as it experienced the longest recession since World War II. There are many
contributing factors that brought on the Great Recession; however, the vital influences were the highly risky mortgage backed securitizations and the
failure of the rating agencies. Overall, the financial sectors were loosely regulated and fueled with corruption, which led to years of scarring the
economy, most importantly the people. As a result, the real gross domestic product (GDP), which assesses the value of economic activity in a nation
including the inflation, received the largest decline, since post–war era (U.S. Bureau Of Labor Statistics, 2012). Consistently, the unemployment, which
consists... Show more content on Helpwriting.net ...
For instance, one of the most well known indicators of a recession is the unemployment rate. The downturn in the business cycle of the 2007 to 2009
delineates that individuals suffered from the recession quickly and painfully. When a person becomes suddenly unemployed, he or she typically relies
on savings and the government, but the government was also experiencing financial dilemmas. Additionally, studied have linked that as unemployment
increases, the suicides in a country also increase (Carey, 2012). Without a job, or an opportunity to find one, hard working americans lost their ability to
provide for themselves and their families. The long term unemployment rose dramatically around the year 2008, all the way to 4.4%. According to the
U.S. Bureau of Labor Statistics, the long term unemployment was the highest in 2008, since 1948, and it affected different demographics with various
intensities (U.S. Bureau Of Labor Statistics, 2012). For instance, the African American unemployment rate was higher than the white rate. Similarly,
manufacturing and construction industries experienced the biggest increase in unemployment; "During the most recent recession... the private sector
experienced a total of 235,000 establishment deaths,"(U.S. Bureau Of Labor Statistics, 2012). The economy experienced mass layoffs, "employers
took 3,059 mass layoff actions in February 2009 involving 326,392 workers,

The Global Financial Crisis ( Gfc )
For me the Global Financial crisis (GFC) has been/is quite important because I remember the majority of what happened and is still going i.e. the
aftermath of the GFC. However, I have never really looked at GFC from a study purpose point of view. Moreover, although I had followed the crisis
in the news I had never really thought about the meaning of the financial terms like Collateralized Debt Obligation (CDO), derivatives and the
International Monetary Fund (IMF), just to name few. Therefore, it was quite interesting for me to read the articles for this week's class.
Being from Denmark one of the first things that I remembered was the housing bubble in the U.S. and then I heard about the Icelandic Bank crack and
that they had borrowed ... Show more content on Helpwriting.net ...
According to Helleiner, the subprime loans were given to people who did not have enough financial proof i.e. they were not creditworthy and should
not have been given the loan, as they could not pay the mortgage back. This then created a ripple effect or spillover effect that spread to the rest of the
States that had financial ties with the U.S as well as those States that invested in their mortgage financial products (Helleiner, p. 69).
Since my Bachelor degree is from Copenhagen Business School and my bachelor degree is more in the humanities/Business communication combined
with European studies i.e. the EU, I had more looked at it from an EU perspective and not really the financial part or the global aspect of the financial
crisis.
I learned and saw that when the crisis hit Europe, the EU was really being put to a test because all 27 members were connected by the ratified treaties
that they were signatory to in order to become an EU member which also meant that the financial burden had to be divided amongst the members.
Germany being a very big State had to carry the largest burden and that has begun to put a strain on Germany's patience (Connolly).
Therefore, I found it quite interesting to read about the financial crisis and the background of it i.e. that it goes back to the 1990s in Helleiner's article
Understanding the 2007–2008 Global Financial Crisis. According to Helleiner, Strange warned about the crisis back in 1998

America's Financial System For The Housing Market
I. Introduction In 2008 America's financial system was brought to a stand still as decades of negligence and financial decisions caused our economy to
sink into the worst recession since the great depression. Cultivating a problem worse than America has seen in roughly a century points one finger not
at a particular cause, but a string of events that finally gave way. Now, eight years later our economy is still recovering, and time has allowed us to look
back at decades of mistakes to try and connect the dots of the perfect storm that collapsed our financial market in 2008. In 2009 Brookings Institution,
one of Washington's oldest think tanks, concluded there were three causes that resulted in the crisis. Economists Martin Baily and Douglas Elliot stated
that the results of government intervention in the housing market, the influences Wall Street had on Washington, and global economic forces were the
three main causes of the economic collapse. They believed that a housing bubble inflated when Fannie Mae and Freddie Mac, two
government–sponsored enterprises, intervened in the housing market. The banking industry was called out to be blamed for years of manipulation of
our political and financial systems. Lastly, Baily and Elliot cite the global economy and the existence of a credit boom throughout European and Asian
nations. Low inflation and consistent growth throughout the world economy spiked investors' interest in acquiring riskier investments, which
encouraged

A Note On Subprime Loans
Recent mayhem in the American economy attributed to a weakening of business regulation. In the absence of oversight, lending became a wildcat
enterprise. Mortgage brokers easily deceived home buyers by promoting subprime loans, and then they passed on bundled documents to unwary
investors. These subprime loans were offered at a rate above prime to individuals who did not qualify for prime rate loans. The loans were made to
people who had no other way to access funds, and little understanding of the mechanics of the loan. A scholarly document onsubprime lending by Hanif
NuMan warns, "Servicing prime and alternative– A (not subprime) loans, the automated underwriting systems were designed to the specifications of
banks and financial institutions, and utilized by loan originators to originate more loans as well as develop a database for the respective entities"
(NuMan). Subprime loans by and large were issued without regard to what would happen if the borrower could not repay the loan. Subprime loans
commonly have adjustable rates that have monthly payments that will dramatically increase two years after receiving the loan. Subprime loans were
usually classified as those where the borrower had a FICO score below 640. Subprime loans can be based on credit scores alone. On the homeowner's
home loan application subprime loans would have the option to use a stated income or even no income or asset verification at all. Special terms
usually accompany subprime loans, for example,

Michael Lewis The Big Short: Inside The Doomsday Machine
INTRODUCTION
The capitalist and the not capitalism or communism are the 2 types of economic system. The capitalist is a free market that gives a freedom to people
to be wealthier without any help, however, the noncapitalist is a government rule the people and people don't have freedom. To be successful in life
people should take a risk by betting or investing mortgages, investments, funds, or other products. The non–fiction book name The Big Short: Inside the
Doomsday Machine is written by Michael Lewis is about the subprime of mortgage and bond, and the work o f people like, Bear Stearns, Deutsche
bank and Steve Eisman of front point partner believes that the housing bubble will be break apart and the wall will be in debt. However, the ... Show
more content on Helpwriting.net ...
If individuals or countries are left unrestricted to pursue their own self–interest that will have an incentive to specialize to comparative advantage thus
making themselves and other better off. More commonly it referred as the advantage of a policy of Laisse Faire, benefits of a free market, allowing
the unrestricted exchange, and it is a capitalist market–based solution. The government leaves people free to choose and it is the best for economic
policy of wealth creation because are unrestricted so that they can create more money and become rich. It describes to The Big Short: Inside the
Doomsday Machine book because the author writes about capitalist economic which is free market and people can be rich on their own without any
political power to help people and it gives an example of people who were free and became wealthy. In fact, the policy or system which increases the
wealth is because of a do–nothing policy rule. This policy also referred to as a free market policy, capitalism, and letting the market to operate. Also, the
do–nothing policy is capitalism and has two ways to get people to comparative advantage and exchange. First leaving people free to pursue their
self–interest as they define it maximum freedom, which leaves people alone, not influences people's values and does not try to help people what is
good or bad they choose so it will lead to specialization according to comparative advantage and exchange. Finally, the united states political system is
uniquely configuring to favor of the "Do–Nothing Policy" and this is why the united states excel at wealth creation and equality. Also, the Big Short is
the story of how in a free market capitalist system people become rich by taking an in their

Questions On Options And Options
в‘ў Options
Options are traded both on exchanges and in the over–the–counter market. There are two types of option which are call option, giving the holder the
right to buy the underlying asset by a certain date for a certain price, and put option, giving the holder the right to sell the underlying asset by a certain
date for a certain price, while both the counter–parties only have obligations (usually the speculators). Apart from that, depending on the expiration
date, American options can be exercised at any time up to the expiration date while European options can be exercised only on the maturity itself.
Because of the right that options provide to the holder to decide whether or not to exercise the contract, there is a cost to ... Show more content on
Helpwriting.net ...
And all the difference here is the reason why options require a premium.
в‘Ј Swaps
Swaps now occupy a position of central importance in over–the–counter derivatives market. The statistics produced by the Bank for International
Settlements show that about 58.5% of all over–the–counter derivatives are interest rate swaps and a further 4% are currency swaps. A swap is an
over–the–counter agreement between two parties to exchange cash flows in the future. The agreement defines the dates when the cash flows are to
be paid and the way in which they are to be calculated. Usually the calculation of the cash flows involves the future value of an interest rate, an
exchange rate, or other market variable. The most popular (plain vanilla) interest rate swap is one where LIBOR is exchanged for a floating rate of
interest. In this swap, one party agrees to pay the other party interest at a fixed rate on a notional principal for a number of years. In return, it receives
interest at a floating rate on the same notional principal for the same period of time. Principal amounts are not usually exchanged in the interest rate
swap.
Take another popular swap as an interpretation for hedging and speculation, which is currency swap. In its simplest form, this involves paying interest
on a principal amount in one currency and receiving interest on a principal in another currency.

A Tale of Two Hedge Funds Magnetar and Peloton
A Tale of Two Hedge Funds: Magnetar and Peloton
Describe in your own words, Peleton's winning strategy in 2006.
Peloton's winning strategy was effective in 2006 and allowed Peloton Partners to become one of the top hedge funds in the country. Ron Beller, the
head of the company bet against the United States housing market. Before the subprime crisis hit the country, and people started to default on their
mortgage, Beller was able to earn a healthy return by taking a short position on the housing market. The objective was to invest in the mortgage as the
banks were issuing mortgages to a large number of people irrespective of their credit history. The investment in mortgage paid around 80% return in
2007
.Describe in your own words how ... Show more content on Helpwriting.net ...
You also need to understand how they were short, and how they were funding their short position).
Magnetar rapidly moved downwards to the securities which they believe were mispriced. They took a long position on the collateralized debt
obligations which have the highest risk but have the potential of healthy returns in good times. It was hedged against the less risky layer of the CDO's
or same securities. Although, the risky securities incur losses, hedging against the less risky securities paid more when the market collapsed.
How could Magnetar have lost money? Using information from the rest of the case, describe how you think they came to the conclusion that the risk
of losing money was remote. (Hint: Though this is a tough question, the answer has to do with how assets in the CDO are correlated).
The risk of losing money lies in the correlation with the asset. Magnetar could lose money if a high correlation exists which would create
non–diversifiable risk. Thus, there is a high likelihood that the senior tranches of CDO's get impaired. If Magnetar contained securities related to the
housing market that is not geographically diverse, then it will have a higher correlation. Thus, the housing

Reading And Reflecting On Michael Lewis ' The Big Short
Reading and Reflecting on Michael Lewis' The Big Short For Commercial Bank Management class I read The Big Short and reflected on its
contents. In this paper, I will describe my reading of the book and show how it relates to this class. I devoted about a week to this project–reading,
reflecting and writing. During this activity, I kept notes on what I was reading so that I could better understand exactly what happened in terms of
concepts like collateralized debt obligations, etc. But what most interested me about this activity was the human element of the story. Lewis begins
The Big Short by telling the story of Meredith Whitney, whose expose on Citigroup in 2007 began a series of Wall Street unraveling. Lewis contacted
her to find... Show more content on Helpwriting.net ...
Eisman is like the little reminder that pops up along the way to let Macbeth know that he is not on the right track: it is called a conscience–and
Macbeth finally squashes it out of himself. Eisman, Lewis shows, has been the voice of conscience on Wall Street for some time, admitting to the
unconscionable–whether the head of "a large U.S. brokerage firm" or "the president of a large Japanese real estate firm"–that their own dealings fail to
make any sense. In the world, there are two types of people, those who say yes and everything else you want to hear–and those who say the truth.
Eisman, however, is the latter type. Vinny Daniel is another. Hired by Arthur Andersen, his job as an accountant was to account
–audit the big Wall
Street firms, in other words. In theory, that is what his job was supposed to be. In reality, his job was to rubber stamp and approve all that such firms
set before him. There is regulation in Wall Street. It is just easily gotten around. People like Vinny Daniel are the ones who clog up the works: "He
concluded that there was effectively no way for an accountant assigned to audit a giant Wall Street firm to figure out whether it was making money or
losing money" (Lewis 11).

Troubled Asset Relief Program Essay
United States has long been portrayed as the country that has the biggest economy in the world. In fact, United States have the highest gross domestic
product which known for its strong economic growth and sustainability, for its currency as an standard unit currency for international trading market,
and for its significant influence and impact to the world market as the leading global trader. Furthermore, United States was able to surpass other
countries as it is able to accumulate its capital more quickly through its extensive capitalistic approach. However, the market of the United States
suddenly collapsed and immediately resulted in the inevitable economic breakdown in late 2000's until late 2010s. This is evident through the book of
Keith ... Show more content on Helpwriting.net ...
In fact, the government intervention was necessary for the banks not to loss hundred percent of their assets and to further save its financial sector as
much as banks never wanted to go bankrupt as banks' do have businesses based on and trust and solvency record. Thus, the United States established
the Troubled Asset Relief Program or TARP with a purpose of insuring all the troubled assets and reinforcing the banks with more capitals for them to
further able to operate and withstand losses where in fact, $700 billion was allotted in this program. With the help of Troubled Asset Relief Program,
the government and the Federal Reserve were able to help JP Morgan Chase to buyout Bear Stearns with $10 per share compared to JP Morgan
Chase's offer of $2 per share. Furthermore, the Federal Reserve and Treasury expanded another $30 billion into the fund of Troubled Asset Relief
Program to completely accommodate the bailout cost of American International Group, which received an overall total bailout amount of $85 billion.
Moreover, the United States government turned out buying out a third of Citi company to save it from going under. Thus, it is clearly shows that both
the government and the Federal Reserve play a crucial role in the hopes of recovery of the financial sector of the United

Political Corruption Essay
Political Corruption – Political corruption is one of the biggest problems in the United States government, but not just here in America, in other parts
of the world as well. This global issue is making big headlines and it is all over the internet, yet people still don't fully believe that U.S. politicians
are corrupt. The people that are making all of the "under the table" deals have got the American people blinded with false promises. The national debt
is growing and we, the people, are blaming the President, illegal immigration, and big companies importing goods but the people that are to blame are
representing us right now. Corruption is defined as moral perversion or the perversion of integrity. (Dictionary.com) This
... Show more content on
Helpwriting.net ...
It turns out the man had serious medical conditions and no health insurance. He robbed a bank to get free health care in prison. ("Corruption In
America") Lies are becoming an everyday part of the business world. JP Morgan marketed a CDO as a good investment when they knew it was total
garbage. The SEC announced that JP Morgan has agreed to pay out 153 million dollars in settle charges related to the sale of a controversial
collateralized debt obligation back in 2007. The people that helped pick out the underlying assets for the CDO also bet heavily that it would fail.
("Corruption In America")
A poll in Time magazine stated that 29% of people do not believe in the American Dream anymore. Maybe that is because we no longer have faith
in the govt. This could be a cause of the lies they feed to us. $38.5 billion in budget cuts are largely illusory. The Washington Post reported, "The
Congressional Budget Office is saying that about $800 million in cuts are being made to domestic programs and foreign aid." ("Corrupted!") The U.S.
government is spending over $2 million a minute. With the National Debt rising, the unemployment line growing, and cuts to things like health care
and public housing, where is all this money going? Law enforcement agencies are considered key agents in peace–building and post–conflict
reconstruction efforts. For that reason, massive resources from the international community have

The Securitization Market and the Credit Crisis
Securitization
Traditionally banks funded their loans from deposits. But the us government found that they could not keep pace with the demand for residential
mortgages with this type of funding. Portfolios of mortgages were created and cash flows (principal amount and interest payments) were packaged as
securities and sold to investors. Securitization allowed the banks to increase their lending faster than their deposits were growing. The US government
created Government National Mortgage Association which protected the mortgage backed securities investors against defaults by borrowers. As the
securitization market developed investors became comfortable with the situations where there was no guarantee against defaults by borrowers.
Asset backed securities (ABS)
It is a portfolio of income producing assets such as loans, lease or receivables and the cash flows from these assets are then allocated to the tranches
which is further divided i.e. the senior tranche, the mezzanine tranche and the equity tranche. The senior tranche is for those investors who want to
play safe because they have first priority on the collateral in the event of default and that is why they are highly rated, the mezzanine tranche contains
moderate risk and the equity tranche is very risky.
Collateralized Debt Obligations (CDO)
It is so called because the pooled assets like mortgages, loans and bonds are essentially debt obligations that serve as collateral in the event of default.
Credit Default

The Burst Of The Housing Bubble Essay
The burst of the housing bubble in the U.S., which peaked in 2004, led to a huge decline in value of securities that tied to U.S. real estate pricing. The
effect caused massive damage to financial institution globally. These three factors including price appreciation in housing market, high growth of the
private–label residential mortgage–backed security in the main fuel for the extensive growth of the mortgage market beginning in 2000. This section
describes the fundamental factors, which are credit risk, liquidity risk, market risk, and operational risk, relating to the financial crisis between 2007 and
2008.
Credit Risk
Credit risk refers to the probability of loss due a borrower's failure to meet its financial obligations on any type of debt. Credit risk may involve the
potential lost from the principle, interest rate, coupon, insurance, bankruptcy, and etc. It is crucial for bank to manage credit risk, and maintain it
exposure within an acceptable parameter which would not lead to a tremendous loss to the banks (BIS, 1999).
The source of credit risk varies from one bank to another. However, loans are commonly known to be the largest source of credit risk. Credit risk
occurs in other related banking activities, such as banking book, trading book, and the off the balance sheet as well. Besides, there are different
financial instruments that create credit risk including bonds, equities, option, future contract, foreign exchange, and swap. In addition, credit risk is

2007-2008 Financial Crisis
The Global Financial Crisis of 2007–2008
The Global Financial Crisis 2007–2008 Economists and scholars spend years dissecting financial markets and evaluating the causes of booms and
busts. Throughout United States history there have been multiple economic booms that were underestimated and followed by recessions. In the
situation of the 2007–2008 global financial crisis many culprits have been identified as causes, such as loose monetary policy, credit booms,
deregulation, over complexity, and greed. Since the economic boom was solely dependent on weak policies and misconceptions, this leads me to
believe prevention was possible with adequate regulatory policy, risk assessment and clarifications for commercial banks.
Monetary ... Show more content on Helpwriting.net ...
Generally homeowners were required to meet certain qualifications in order to borrow funds for mortgages, also known as prime mortgages. Since the
prime mortgage market had receded, lenders were encouraged to lower their requirements for lending and began to allow subprime mortgages. These
less responsible homeowners began to default on their mortgages, which turned investment bankers' stream of mortgage payments into empty houses.
Increases in foreclosures raise the supply of available houses, which lowers the fair market values of houses. The prime mortgage homeowners were left
with houses that were highly devalued relative to their mortgages and began to abandon their mortgage obligations. Mortgage lenders, investment
bankers, and outside investors froze their activities, as they faced possible bankruptcy.
Regulatory/Supervisory Inadequacies Deregulation is believed to be the underlying cause of all economic downturns, as its scope of responsibility
reaches all markets. In the 1930s the United States experienced a bank crisis that sparked a widespread distrust in the banking system and people
withdrew their money from the depository institutions overnight. The sudden retraction of the money supply from the economy caused many banks to
close and the economy to suffer. The Banking Act of 1933, also known as the Glass–Steagall Act, was created to insure depositors'

Kohlberg 's Six Stages Of Moral Development
1.Goldman Sachs should have been punished for its behavior in the years leading up to the financial crisis. Goldman ended up settling with the
federal government for $110 Billion, which I do not believe was sufficient based on the magnitude of problems created. This amount should have been
much larger, and at minimum they should have forfeited the $14 Billion paid to them by AIG. (Inside Job, 2011) In addition, AIG should have had the
right to sue Goldman Sachs for fraud. It was in the public's best interest to keep Goldman up and running, however additional penalties could have been
put on a repayment schedule to keep them solvent. Instead, you had Goldman giving out large bonuses. Executives and those responsible for misdeeds
should have been subject to significant clawbacks of compensation. If the reason they misbehaved and took inappropriate risks was to raise
compensation, losing that compensation would be an appropriate punishment. 2.Kohlberg's six stages of moral development can be applied to
corporations. Corporations are made up of individuals, and the corporate culture can contribute to an individual's moral decision making. Mintz tells us
that "an individual's moral development can be influenced by corporate culture, especially ethics training." (p. 58) Since the corporate culture can so
heavily influence individual ethical decision making, the stage of moral development of the corporation is important. An example of Stage 2
preconventional moral

The Financial Crisis Of 2008 Hit The American Economy
The financial crisis of 2008 hit the American economy and the world economy as well. It cost tens of millions of people their savings, jobs, and their
homes. For decades the American financial system was stable and safe, but it changed. The financial industry turned its back on society; it corrupted
the political system, and plunged the world economy into crisis. It was not an accident; it was caused by an out of control industry, a greedy industry.
The crisis has made more damage to society while the industry has made more money. The residentialmortgage crisis affected commercial real estate
by making credit much more difficult to get. Real estate investment has been driven by leverage. One of the great things about real estate investment is
that you do not need just cash to do it. The possible investors are either reluctant to acquire and develop real estate without the need of debt. As a result,
the demand for real estate slowed and prices fell down. To understand better how everything started, let's mention the great depression. After the Great
Depression, the United States had forty years of economic growth without a single financial crisis. The financial system was regulated, and most of the
banks were local. They were prohibited from speculating depositor's savings. Investments banks were small private partnerships in charge of handling
stock and trading. The private partnerships partners put their own money up as their investments; therefore they didn't risk as

The Growth Of The Economy Essay
Showtime in late 1950's Minsky started warning about the gradual shift of the economy from a very robust financial system that was stable and with
no financial crisis in the early postwar period. He had called with his analysis that gradually over time debts in the private sector would tend to build
up and increasingly risky financial innovations would increase over time. He is very famous for the statement that stability itself is destabilizing.
Although things seem very stable today, gradually over time that stability would build confidence to take increasingly risky positions in assets. The
model that he had built explains financial crisis in the economic system. He brings up that supply of credit increases during boom and abruptly
decreased during economic slowdown. It seems almost intuitive that from a standpoint of an investor the great time to invest is when the economy is
booming to increase his or her profitability. Lenders as the investors become increasingly optimistic about their return and they both become less
sensitive to risk. But when the economy starts slowing down investors sell out their holding to not to lose more of their assets making the economy
even worse off. All of the New Deal structure that have been put in place in the economy during the great depression, tremendous buildup of
government debt during World War II gave a very safe asset for the private sector. This would be in a sense leveraged, the safe government debt would
serve a base

Moral Hazard And The Banking System
Moral Hazard and the Banking System ACCT 6377: Corporate Governance Zachary Seay The University of Texas at Dallas Introduction The moral
hazard of bank bailouts is a very simple idea enveloped in a very complex issue. Back in late 2007 to mid–2009 the United States and the global
economy faced one of the worst recessions the world has ever seen. In fact the time period has been dubbed the Great Recession. Now at a broad
level this recession was caused essentially by our large banks buying and positively rating thousands upon thousands of mortgage backed securities
and collateralized debt obligations. In addition, the banks started getting to a point where they were leveraged sometimes in excess of 30 to 1. The
Federal Reserve initially recommended banks try to stay around 10 to 1.(d) When the mortgages started to foreclose the value of those securities
plummeted and the banks started to lose solvency. With the issue of possible banks going into bankruptcy the government of course got involved.
Instead of letting the banks fail, taxpayers instead bought up many of those toxic securities along with toxic bank stock and set the banks free
without so much as a slap on the wrist. This is what many have come to consider a moral hazard. It is hard to tell if our actions really even helped as
the economy didn't start getting to back to normal until around 2012. Mortgage backed Securities & Collateralized Debt Obligations Mortgage backed
securities and collateralized debt

Collateralized Debt Obligation: The Lehman Brothers Case...
Letter of Transmittal
3/82 Wellington Rd
Clayton, Vic 3168
September 6, 2012
Dr. Mohammad Hoque
Department of Accounting and Finance
Monash University
PO Box 197
Caulfield East, Vic. 3145
Australia
Dear Mr. Mohammad Hoque:
Enclosed is a copy of "Group Assignment" about the understanding of CDOs. This report is aim to critically examined how CDOs may help banks
to avoid liquidity risk and create more assets, and also problems in term of the purpose of CDOs, the role of three mechanisms in CDOs and problems
faced in CDOs. After that, it discusses how CDOs created problem for Lehman Brothers by analysis subprime mortgage crisis. Finally, this report
provides some recommendations for making the CDOs as effective liquidity risk ... Show more content on Helpwriting.net ...
Secondly, this report will provide an example – the Lehman Brothers which was involved in CDOs and give that how CDOs created problems in it and
finally let Lehman Brothers bankrupt. Last, this paper will provide four recommendations for making the CDOs as effective liquidity risk management
mechanism for banks or financial institutions. All these four recommendations need government, banks and financial institutions corporate. Finally,
this report will give a conclusion that emphasizes the analysis and evaluation of CDOs in this paper.
Main Body:
The Purpose of CDOs
Collateralised Debt Obligations, short for CDOs, is an important part of asset securitisation. CDOs provided more liquidity in the economy which was
a popular financial innovation. It is an innovative financial product that repackages different debts into a new portfolio. In CDOs, investment bank

gathered a series of assets from the fixed–income market, such as mortgage–backed securities, credit–default swaps, and high–yield bonds. Once the
CDO has created by the investment bank, it would distribute the cash flows from those mentioned assets to investors in the CDO. CDOs pool all the
cash flows from its collection of assets together and divided into rated tranches or slices, in order to satisfy the needs of different risk preferences of
investors. Suppose there are three basic tranches, safe, good enough and risky. When money comes in, the top one will be filled in first. It

Essay On Financial Crisis Of 2008 Analysis

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Essay On Financial Crisis Of 2008 Analysis